On Tuesday, UBS reaffirmed its Neutral rating on Harley-Davidson shares (NYSE: NYSE:HOG) with a steady price target of $35.00. UBS analysts highlighted concerns regarding the motorcycle manufacturer's recent retail performance in the United States. According to the firm, Harley-Davidson's U.S. retail sales possibly saw a decline nearing double digits in October and November, continuing the downward trend from the previous year's fourth quarter. Preliminary checks for December indicated a similarly negative outlook. The stock currently trades at $28.33, near its 52-week low of $27.37, with a P/E ratio of 6.42x. InvestingPro analysis suggests the stock is currently overvalued despite these metrics, with additional insights available in the comprehensive Pro Research Report covering this iconic manufacturer.
The analysts pointed to several factors contributing to the sluggish sales, including broader economic issues such as interest rates. Additionally, they noted that tighter credit requirements imposed by Harley-Davidson Financial Services may have further constrained sales figures. The report suggests that the first quarter could prove challenging for Harley-Davidson, especially considering California's significant share in U.S. motorcycle retail sales, which is estimated to be around 10% of the total and even higher during the off-season months like January and February. Despite these challenges, InvestingPro data shows the company maintains a strong free cash flow yield of 21% and has consistently paid dividends for 32 consecutive years, currently yielding 2.4%.
The UBS statement also emphasized the potential impact of California's market size on Harley-Davidson's first-quarter retail performance. With the state being a major player in motorcycle sales, any shifts in this region's buying patterns are likely to have a noticeable effect on the company's overall quarterly results.
Harley-Davidson's financial services arm's stricter credit requirements were specifically mentioned as a hurdle for potential buyers. These tighter lending criteria could be limiting the ability of some customers to purchase motorcycles, thus contributing to the decline in sales.
Despite the concerning sales trends noted by UBS, the firm has not adjusted its price target for Harley-Davidson stock, maintaining it at $35.00. The continued Neutral rating suggests that the analysts see neither a particularly strong upside nor a significant downside to the stock at the current price level, given the challenges and market conditions described.
In other recent news, Harley-Davidson has been making headlines with its financial performance and strategic decisions. The motorcycle manufacturer reported a challenging third quarter in 2024, with a 13% drop in global retail sales and a 26% decrease in consolidated revenue. The company's earnings per share also fell by 34% to $0.91. Despite these setbacks, U.S. retail sales saw a decrease of only 1%, supported by nearly 10% growth in the touring segment.
In response to these challenges, 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. This strategic decision comes in light of analyst reports from Citi and Baird, both of which have lowered their price targets for Harley-Davidson due to concerns over high inventory levels and persistent retail sales declines.
Alongside these financial developments, Harley-Davidson also announced an update to its 2025 motorcycle line-up, introducing several new and refreshed models. These include the fully equipped Street Glide Ultra and the Pan America 1250 ST adventure sport motorcycle. Lastly, Harley-Davidson continues to demonstrate its financial stability and commitment to investors by announcing a quarterly cash dividend of $0.1725 per share. These are among the recent developments for Harley-Davidson.
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