Morgan Stanley has resumed coverage of Harley-Davidson (NYSE: HOG) with an ‘Overweight’ rating, citing optimism in the company’s turnaround efforts. Analyst Megan Alexander highlighted Harley-Davidson’s iconic brand status, leading market share in the U.S. motorcycle industry, and fiercely loyal customer base as key strengths. Despite a relatively small and aging addressable market, Alexander noted positive momentum in the company’s turnaround under new leadership. She emphasized the benefits realized from prior restructuring actions and the company’s drive to innovate in its core product portfolio with a greater emphasis on profitability.
Alexander and her team expressed confidence in Harley-Davidson’s refocused strategy and strong capital allocation discipline, believing it will deliver upside to consensus earnings estimates. They pointed out that the company’s valuation looks attractive at less than 9x FY24 P/E (on MSe) versus the stock’s historical average of ~10.5x and a ~11% FCF yield. Despite some expected headwinds in 2024, the analysts believe Harley-Davidson can return to growth in 2025 and view the current valuation as inexpensive in light of their forecast for ~11% EPS growth in 2025 to ~$5.
Morgan Stanley’s overall view on Harley-Davidson is that the company is better positioned post-COVID due to its notable restructuring and strengthened balance sheet. The firm assigned a price target of $50.00 to Harley-Davidson, whose shares rose 0.55% in premarket trading to $39.20. This positive outlook aligns with recent positive dealer checks and new product launches, indicating a potential resurgence for the iconic motorcycle brand.
