Harley-Davidson Stock Could Disappoint in 2017
Harley-Davidson (HOG) is the most popular heavyweight motorcycle manufacturer in the world. The company maintains its own premium space in the crowded motorcycle market. Last year, Harley-Davidson stock impressed investors by delivering over 28% positive returns. However, its 2016 earnings report disappointed investors. The report was released on January 31, 2017.
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According to the latest data compiled by Reuters, 22% of the 23 analysts covering Harley-Davidson gave the stock “buy” recommendations, 69% recommended a “hold,” and 9% recommended a “sell.”
On March 16, 2017, Harley-Davidson’s consensus 12-month target price was $57.92—already lower than its market price of $62.47.
Key negative factors
Most Wall Street analysts maintained a neutral view on Harley-Davidson after its dismal 4Q16 earnings release. For the last few quarters, the company’s margins have been falling gradually, along with ongoing stagnation in its overall shipments. These could be some of the key reasons why analysts adopted a cautious approach with respect to Harley-Davidson stock.
However, we should remember that Harley-Davidson sells its motorcycles to customers with high disposable income. In general, an increase in the number of people with high disposable income could be positive for Harley-Davidson’s sales as it enhances consumers’ purchasing power. In the last few quarters, the US jobs market witnessed handsome improvement along with a positive trend in wages.
A continuation of the positive trend in the US jobs scenario could boost the company’s sales going forward and keep investors’ optimism alive in 2017. It could be why Harley-Davidson stock has risen ~7.1% in 2017.
Due to the nature of the business and its premium product portfolio, Harley-Davidson’s margins are much higher than mainstream automakers (VCR) such as General Motors (GM), Ford (F), and Fiat Chrysler (FCAU).
Read Do Automakers’ Recent Performances Bode Well for Rest of 2017? to learn about mainstream automakers’ recent earnings.