12:48 PM, Mar 6, 2019 — Increased competition combined with depressed prices of Harley-Davidsons (HOG) on the pre-owned market segment are weighing on demand, according to Wedbush, though the investment bank said offsetting measures include management’s increased innovation in the last two years that include expansion into the electric segment.
Analysts said the company headed by Matthew Levatich is facing stiffer competition from Indian Motorcycle, which is directly targeting Harley Davidson’s core customers with respect to heritage, styling and pricing.
“There remains underlying excitement for the direction Harley is moving with its new model platforms, but the 2020-plus model years are doing dealers no favors in drawing in younger buyers for new bikes in the short-term,” analysts including James Hardiman wrote in a research note sent to clients on Wednesday.
Hardiman said he sees January registrations retreating in the low double-digits after a 10% decline in retail sales in the fourth quarter. However, a surge in tax refunds could constitute a tail-wind over the next six weeks. Still, disbursements in the first two months have slumped by about 4%.
To address the high cost of ownership prospects say is the biggest purchase barrier, management marketed earlier this week the cheaper Electra Glide Standard. The “bare-bones” $19,000 product, priced $5,500 below the Electra Glide Ultra Classic, might contribute to halting what Wedbush says is shrinking market share.
Going forward, the Milwaukee, Wisconsin-based manufacturer plans to diversify its product mix by penetrating the electric segment with the launch of its Livewire model, expected in August. Projections for the new product remain mixed, Wedbush says, with some dealers anticipating significant pent-up demand for the bike while others balking at the price tag of some $30,000, the second most expensive non-custom model in the firm’s portfolio.
In a bid to expand its customer base, the 115-year-old company said Tuesday it acquired StaCyc, a maker of electric-powered motorcycles designed for children in a bid to stay at the fore of electric cycling.
StaCyc entered the market in 2016 and sells the small e-drive vehicles from $649 to $699 through 29 Harley-Davidson dealerships as well as other powersports dealerships, online and in specialty bicycle retailers.
In 2019, the investment bank expects the company’s revenues to drop for the first time in at least three years, retreating to $4.84 billion and dragging down earnings per share to $3.12 from $3.19 last year. With a neutral stock recommendation, Wedbush set the 12-month price target on the shares at $35, or 10% below Tuesday’s close. The stock retreated 0.6% on Wednesday.
Companies: Harley-Davidson, Inc.
Price: 38.37 Price Change: -0.43 Percent Change: -1.11