Harley-Davidson Might Not Get Enough Boost From LiveWire to Ease Retail Declines, Wedbush Says

3:28 PM, Jul 12, 2019 — Harley-Davidson (HOG) probably won’t get enough of a boost from next month’s launch of its electric motorcycles to stem recent retail declines and the company could face competition amid reports of a new Indian Motorcycle brand bike from Polaris Industries (PII).

Dealer contacts in the US saw a 5% to 6% decline in retail unit registrations in the second quarter, Wedbush analysts James Hardiman, Sean Wagner and Matthew McCartney said in a note Friday. That would represent a deceleration against the decline of about 4% reported by the company in the first quarter, they said.

Differences in weather, promotional activity and difficult comparisons from a year earlier are to blame for the slowdown, according to Wedbush, which has a neutral rating on the stock with a $35 price target.

“As we have seen across our leisure coverage, record-setting rainfall has plagued floor traffic,” they said. “At the same time, the unusually aggressive promotions that sparked the March strength tapered off over the course of the quarter.”

LiveWire, Harley-Davidson’s first electric motorcycle, has been heavily marketed and Wedbush estimates 200 to 400 bikes will be made in initial shipments, with about 600 to 1,800 in the first year as up to 200 dealers carry the product.

“Longer term, for LiveWire to make a real dent in the demand shortfall for HOG, we would need to see consumers buy into electric motorcycles in general and a $30K electric motorcycle from Harley-Davidson in particular,” the analysts said.

Polaris could offer competition to Harley-Davidson with reports circulating that it could launch Indian Raptor, a touring bike that looks to be targeting customers for Harley’s Road Glide, Wedbush said. “In addition, we believe that Indian is likely working on street and adventure bikes as well, suggesting that HOG’s entry into these segments are unlikely to be uncontested.”

Still, Wedbush is ahead of Street projections for the second quarter and 2019, and have a base case that Harley-Davidson “will eventually grow share and expand margins going forward.” They see second-quarter earnings of $1.30 a share against expectations for $1.21, and see EPS of $3.15 on the full year against $3.04 projected by Wall Street.

Companies: Harley-Davidson, Inc.
Price: 36.62 Price Change: +0.52 Percent Change: +1.44


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