New Marketing And Product Launches Will Reshape Motorcycle Market Dynamics

Key Takeaways

• Strategic entry-level products and marketing efforts could expand customer base, increase revenue, and support dealers effectively.
  
• Innovations and demand-aligned production may enhance performance offerings and stabilize revenue while improving margins.
  
• Declining sales, market uncertainty, and EV challenges pose significant risks to Harley-Davidson’s revenue and profitability forecasts.

Catalysts

Manufactures and sells motorcycles in the United States and internationally.

• Harley-Davidson is planning a significant marketing push with the Marketing Development Fund to support dealers into and beyond the riding season, which could boost future revenue.
  
• The introduction of new entry-level products in smaller displacements is expected to be highly affordable and could be profitable, potentially growing revenue and expanding customer base.
  
• Harley-Davidson Financial Services (HDFS) delivered better-than-expected results this quarter, and strategic investments into HDFS are being evaluated to enhance shareholder value, which could improve earnings.
  
• The launch of the limited production CVO Road Glide RR and new product innovations in touring and trike motorcycle platforms could boost revenue and margins by catering to customer demand for performance and customization.
  
• Changes in model year timing and strategies to reduce dealer inventory are expected to align production more closely with demand, potentially stabilizing revenue and improving net margins.

Harley-Davidson Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Harley-Davidson's revenue will decrease by 4.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 7.4% today to 11.3% in 3 years time.
• Analysts expect earnings to reach $468.1 million (and earnings per share of $4.3) by about May 2028, up from $353.5 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $393.0 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 8.4x on those 2028 earnings, up from 8.2x today. This future PE is lower than the current PE for the US Auto industry at 13.9x.
• Analysts expect the number of shares outstanding to decline by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.41%, as per the Simply Wall St company report.

Harley-Davidson Future Earnings Per Share Growth

Risks

• Global retail sales were down 21% in Q1 and down 24% in North America, affected by historically low levels of consumer confidence in an uncertain macro environment, which could impact future revenue growth.
  
• The APAC region experienced a 28% retail decline, driven by weaknesses in markets such as China and Japan, posing risks to international revenue streams.
  
• Harley-Davidson has withdrawn its previous 2025 guidance due to significant uncertainty around economic conditions and the potential impact of tariffs, which creates unpredictability in revenue and earnings forecasts.
  
• The financial performance of Harley-Davidson Financial Services (HDFS) could be at risk due to external market evaluations and potential strategic changes, impacting profitability and financial service income.
  
• Challenges in the electric vehicle (EV) market, such as the slow adoption rate and infrastructure limitations faced by LiveWire, along with significant operating losses, present financial risks that could affect overall earnings.

Valuation

• The analysts have a consensus price target of $28.579 for Harley-Davidson based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $32.0, and the most bearish reporting a price target of just $24.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $4.1 billion, earnings will come to $468.1 million, and it would be trading on a PE ratio of 8.4x, assuming you use a discount rate of 11.4%.
  
• Given the current share price of $23.31, the analyst price target of $28.58 is 18.4% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.