Harley-Davidson (HOG), the iconic motorcycle manufacturer, continues to grapple with falling demand as retail sales in North America slid 13% in the last quarter. Harley’s appeal among younger riders has waned, as they prefer contemporary and cheaper rides from rival manufacturers. The company has aimed to shore up its revenue by focusing on its higher-margin Touring bikes, which are ideal for wealthier customers. But the fiscal battle is uphill. Harley’s Q4 2024 revenues experienced a 35% drop compared to the same period in 2023.
Maximize Your Portfolio with Data Driven Insights:
- Leverage the power of TipRanks' Smart Score, a data-driven tool to help you uncover top performing stocks and make informed investment decisions.
- Monitor your stock picks and compare them to top Wall Street Analysts' recommendations with Your Smart Portfolio
Meanwhile, its 2024 annual income was down 47%. While the stock trades at a relative discount, investors might want to hold off until the manufacturer can demonstrate a turn in its revenue trajectory.
Harley Spreads Its Bets
Harley-Davidson, Inc. is a leading motorcycle manufacturer globally. The business is divided into three key segments: Harley-Davidson Motor Company, LiveWire, and Harley-Davidson Financial Services.
The Harley-Davidson Motor Company designs, manufactures, and sells a wide variety of motorcycles. It also offers parts, accessories, and apparel, licenses its trademarks, and sells its products through independent dealers and e-commerce channels.
LiveWire, another segment of Harley-Davidson, focuses on the sale of electric motorcycles, balance bikes for children, and related products.
Lastly, the Harley-Davidson Financial Services segment provides various financing services, from wholesale financing of motorcycles and parts to retail funding for purchasing new and used Harley-Davidson motorcycles. Additionally, it offers point-of-sale insurance and voluntary protection products and licenses third-party financial institutions to issue Harley-Davidson-branded credit cards.
An Ongoing Decline in Revenue
The company reported disappointing results from a challenging fourth quarter. In addition, revenue dropped 35% year-over-year to $688 million. The consolidated operating loss was $193 million, compared to a loss of $21 million in the prior year’s period. This translated to a loss per share of -$0.93, which missed consensus expectations by $0.27.
The full-year consolidated revenue dropped by 11% to $5.1 billion, primarily due to a 15% decrease at HDMC and a $12 million decrease at LiveWire. However, a 9% rise occurred at HDFS. Consolidated operating income also fell by 47%, with a significant 58% reduction at HDMC but a 6% increase at HDFS. LiveWire experienced a $110 million operating loss for the year, which met projections.
In 2025, the company expects flat to 5% lower HDMC revenue and an operating income margin between 7.0% and 8.0%. HDFS’s operating income is projected to decrease by 10% to 15%. Harley-Davidson also foresees an operating loss between $70 million and $80 million from the electric motorcycle unit sales of 1,000 – 1,500. EPS is projected to be flat to down 5%.
HOG Stock in Value Territory
The stock has been declining, shedding 19.43% in the past year. It trades at the low end of its 52-week price range of $25.60 – $44.16 and shows ongoing negative price momentum as it trades below the major moving averages. The decline in price has driven the stock into relative value territory, as its P/S ratio of 0.67x sits below peers in the Consumer Discretionary sector where the average P/S ratio is 0.96x
Analysts following the company have taken a cautious approach to HOG stock. For example, DA Davidson, BofA, and Citi have recently lowered their price targets for shares of HOG, maintaining a Buy and Neutral rating, respectively. Reasons given include challenging U.S. retail trends, elevated non-current inventories, and a tough backdrop going into 2025. The firms forecast a need for inventory destocking in the first half of the year and have lowered their FY25 EPS outlooks. The company faces difficult year-over-year comparisons without any game-changing product slated for 2025. Despite all this, Harley’s stock valuation is still considered “attractive”.
Harley-Davidson is rated a Moderate Buy overall, based on the recent recommendations of seven analysts. The average price target for HOG stock is $32.57, representing a potential upside of 21.44% from current levels.
Bottom Line on Harley-Davidson
Harley-Davidson continues to face turbulent times, with a drop in North American retail sales and a tough year financially. The business has seen a sharp decrease in revenue and income in 2024 but shows some resilience in its financial services unit. While its stock is currently trading at a discount and is considered “attractive,” investors should be cautious and possibly wait for a tangible rebound.
