What Kept Harley-Davidson Stock Weak in October
Last week (ended November 10), Harley-Davidson (HOG) stock traded on a mixed note and ended the week at $47.30, showing a minor weekly rise of 0.6%. The company’s stock has lost ~18.9% YTD (year-to-date) and has seen a value erosion of 1.9% in 4Q17 so far.
Interested in HOG? Don't miss the next report.
Receive e-mail alerts for new research on HOG
Weekly technical update
In October 2017, Harley-Davidson stock turned negative and lost about 1.8%, after gaining 2.6% in September. On the hourly stock price chart, it was trading under a downward sloping trendline, also known as a descending trendline, suggesting weakness in the trend. Its 14-day RSI (relative strength index) indicator was hovering below the line of equilibrium at 50.2 level, which confirmed a neutral bias in the stock’s underlying momentum.
An important support level was seen near $45.90, which was followed by the next horizontal support level of ~$42.40.
Could negative sentiments prevail?
In 3Q17, Harley’s adjusted earnings were at $0.40 per share—about 37.5% lower than its earnings in 3Q16. The company’s global revenues fell ~12% in 3Q17, and its gross margin fell to 24.5%, compared with 28.8% in 3Q16. These negative factors could continue to haunt HOG investors in 4Q17.
Notably, Harley’s profitability has shrunk over the past few quarters due to unfavorable product mix. For HOG, lightweight motorbikes tend to yield lower profit margins than heavyweight motorbikes yield. Similarly, legacy automakers (IYK) Ford Motor (F), General Motors (GM), and Honda Motor (HMC) make higher profits from heavyweight vehicles than they do from small cars.
Please visit Market Realist’s Autos page for these auto companies’ latest news and 3Q17 earnings reviews.