(Image Courtesy of Harley Davidson, Model: 1973 Sprint)
I have been writing about the state of motorcycling and Harley Davidson off and on for a while now. While I hold no position in the stock, I have been noting that they are in trouble with the macro picture of ridership, aging out of core customers, political polarization, and low price competition from Royal Enfield, Honda, and others.
On today’s earnings call they announced news that stunned even me, who has been calling for a $10,000 made in USA Harley. Even if they lost money on it, it would still do better for their future than losing $100M while selling 200 units of Livewire.
Well, they announced that this October they will be launching a sub $6,000 motorcycle possibly named “Sprint.” This may not only save Harley Davidson, but motorcycling in general.
Keep in mind Harley already sells the small-displacement X 350, X 440, and X 500 in Asian markets.
Harley-Davidson announced a deal to sell a portion of its Harley-Davidson Financial Services division. Financial firms KKR and PIMCO will each buy 4.9% of HDFS and will each take on a third of new loans going forward for at least the next five years. The two new partners are also buying $5 billion in loan receivables. That frees up $1.25 billion that Harley-Davidson will use to reduce debt, buy back shares, and invest in new products.
These developments could be similar to when the Porsche 944 saved Porsche when they were struggling. There are so many other examples in corporate history.
The new model is possibly a master stroke.
Brings younger lower income first time buyers into dealerships and the brand
Upsell to more expensive models in future and make the brand relationship a life long one
Take market share from other low cost models around the world
Helps their dealer network survive and possibly thrive
Increase top line and bottom line on balance sheet
at sub $6,000 it becomes a super cost saver alternative for transportation
Will even take market share from scooter market in parts of world where ridership is growing (Vietnam, China, India)
At $26.xx this might be a decent time to consider a long term position in $HOG.
Todays earnings presentation slides and webcast:
Let’s take a look at their financials and stock chart technicals…
Technically speaking we are in a very large balance area between $6 and $50. Within that structure there is a mini balance area between $23 and $25. On the news of earnings, selling a stake in Harley Financial and this new $6,000 model, the stock gapped above the smaller balance area and above the long term orange trend line, which had held since it’s IPO in 1987 and broke down recently!
The Stock is pausing at the 200 day moving avg and if it can find a launch pad it may seek higher auction range.
As long as HOG 0.00%↑ can stay above the break out of the mini balance or $26.00, Harley’s stock could be mounting a turn around. Reminder, it also pays a 2.63% dividend. If I had a new position I would not let it fall below $24.
The major key will be ridership trends globally. If the new generation shuns all transport and owning any car or motorcycle, than everything above is hopeless and HOG will fall to previous depths.
But I suspect the youth will soon begin to rebel the tiktok screen culture and yearn for the experience of the open road that only a motorcycle can provide. The danger, fun, speed, smells and the dichotomy of solitude while having the ability to meet new friends and people in real life.
But make no mistake, there are massive headwinds for Harley Davidson and motorcycling in general. They are still losing market share, dealerships are closing at record pace, their financials are not awesome, CEO polarizing their customer base, and overall motorcycle market is struggling as a whole.
Below are the financials for your reading pleasure.
Conclusion
I have some hope for Harley, motorcycling, and the next generation of youth not being glued to their social feeds.
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