DA Davidson cuts Harley-Davidson target to $31, keeps Buy rating

On Tuesday, DA Davidson revised its price target for Harley-Davidson shares (NYSE:HOG), lowering it to $31 from the previous $39, while maintaining a Buy rating on the stock. Currently trading at $26.47, near its 52-week low of $25.60, the stock has declined over 25% in the past six months. According to InvestingPro analysis, the stock’s RSI suggests it’s in oversold territory. The adjustment follows a review of the company’s fourth-quarter performance and market conditions, which highlighted several challenges and opportunities.

Analysts at DA Davidson noted that recent checks on Harley-Davidson revealed strained retail trends in the U.S. during the fourth quarter of 2024. With revenue of $5.55 billion in the last twelve months and a gross profit margin of 28.4%, the company is dealing with elevated levels of non-current inventory that may require further destocking throughout much of the first half of 2025.

Despite these challenges, positive feedback was received regarding the pricing of Harley-Davidson’s model year 2025 (MY25) products. As Harley-Davidson approaches its fourth-quarter earnings report, DA Davidson anticipates that the company will issue a fiscal year 2025 guidance that falls well below the consensus expectations of market analysts.

The revised price target of $31 reflects a Sum of the Parts (SOTP) valuation approach. This valuation method applies a 9.5 times Price to Earnings (P/E) multiple on the projected 2025 earnings for Harley-Davidson Motor Company (HDMC) and a 7.0 times P/E multiple on the projected 2025 earnings for Harley-Davidson Financial Services (HDFS).

Harley-Davidson’s stock performance and investor sentiment will likely be influenced by the upcoming earnings report and the company’s strategy to navigate the inventory and pricing challenges in the current fiscal year.

In other recent news, Harley-Davidson has faced significant financial challenges. The company reported a 13% drop in global retail sales, a 26% decrease in consolidated revenue, and a 34% decline in earnings per share to $0.91 in the third quarter of 2024. In response, 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.

Simultaneously, Harley-Davidson has updated its 2025 motorcycle line-up, introducing several new and refreshed models. These updates are part of the company’s broader efforts to respond to market demands and consumer preferences. Furthermore, Harley-Davidson has announced a quarterly cash dividend of $0.1725 per share, demonstrating its financial stability and commitment to investors.

Analysts have also weighed in on Harley-Davidson’s financial outlook. BofA Securities adjusted the price target for Harley-Davidson shares to $35.00, while maintaining a Buy rating. Meanwhile, UBS reaffirmed its Neutral rating on Harley-Davidson shares with a steady price target of $35.00. Citi revised the price target for Harley-Davidson stock to $31.00, maintaining a Neutral rating on the shares. These are the recent developments for Harley-Davidson.

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