On Thursday, Citi analyst James Hardiman revised the price target for Harley-Davidson stock, traded on (NYSE:HOG), to $31.00, down from the previous $31.00, while maintaining a Neutral rating on the shares. The stock, currently trading at $28.26, is considered overvalued according to InvestingPro Fair Value metrics, despite trading near its 52-week low and at an attractive P/E ratio of 6.4x. The adjustment follows a period of challenging market conditions for the motorcycle manufacturer.
Hardiman expressed concerns over various factors impacting the company. A significant retail sales decline at the year’s end, worsening dealer sentiment regarding inventory levels, and an increase in weeks-on-hand inventory were highlighted. These issues arise despite expectations of stable year-end inventory figures against a backdrop of approximately 7% retail sales reduction. InvestingPro data shows revenue declined 6.3% in the last twelve months, with analysts forecasting further sales weakness ahead.
The analyst also pointed to the unpredictable interest rate environment and tough innovation comparisons, noting the absence of major new products for Model Year 2025 compared to the highly anticipated revamp in Model Year 2024. These factors, Hardiman suggests, could weaken Harley-Davidson’s earnings potential for 2025.
Despite these challenges, Hardiman anticipates that Harley-Davidson’s management might begin the year with an optimistic earnings outlook, possibly forecasting in the $3.50 to $4.00 range. However, he argues that a more conservative approach regarding retail expectations and inventory management could better position the company to defend against short sellers and enhance its long-term health.
In other recent news, Harley-Davidson faced significant challenges in its third quarter of 2024, with a 13% drop in global retail sales and a 26% decrease in consolidated revenue. The company’s earnings per share also fell by 34% to $0.91. Despite these setbacks, U.S. retail sales saw a decrease of only 1%, supported by nearly 10% growth in the touring segment.
In response to these challenges, Harley-Davidson is implementing measures to improve profitability and dealer support, focusing on reducing inventory and cost management. The company plans to reduce dealer inventory by 20% by year-end.
Meanwhile, Baird has adjusted the price target for Harley-Davidson stock to $36.00, maintaining a neutral rating. The firm cited concerns regarding high inventory levels and a history of persistent retail sales declines as reasons for the adjustment.
Citi also reduced its price target for Harley-Davidson from $39 to $34, maintaining a neutral rating. The firm expressed reservations about Harley-Davidson’s ambitious margin targets for 2025 and 2026, suggesting they might be set too high.
Lastly, Harley-Davidson announced a quarterly cash dividend of $0.1725 per share, demonstrating its financial stability and commitment to investors. These are some of the recent developments for Harley-Davidson.
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