On Thursday, BofA Securities adjusted its outlook on Harley-Davidson (NYSE:HOG), raising the shares price target to $55 from $50 and maintaining a Buy. The revision reflects the firm's confidence in the motorcycle manufacturer's prospects following a significant update to its Road Glide and Street Glide model families.
The refreshed touring models, which are among Harley-Davidson's highest-margin products, are expected to initiate a multi-year upgrade cycle, capitalizing on an addressable market of approximately 1.5 million Harley touring riders. According to BofA Securities, dealer sentiment has been at its highest in over a decade, buoyed by enthusiasm for the new models.
Harley-Davidson has reportedly experienced strong retail sales in the U.S., with expectations of further benefits once the new models ship internationally by the end of March. The company is also anticipated to gain from manufacturing efficiencies and a more predictable supply chain, which management believes will contribute to realizing around $100 million in cost savings this year.
The price objective increase to $55 is based on an earnings multiple of 11-12 times the projected 2025 earnings per share of $4.75. This adjustment is attributed to the strong consumer response to the new model launches, which have not been affected by the current rate environment. Harley-Davidson's strategic updates and anticipated cost savings appear to set a positive trajectory for the iconic motorcycle brand in 2024.
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