What Will Be The Impact On Harley-Davidson’s Valuation If Motorcycle Sales In The US Accelerate?
Harley-Davidson‘s (NYSE:HOG) US shipments declined 2% year-over-year in 2015, as stiff competition hurt the motorcycle maker. The stronger U.S. dollar gave pricing advantage to European and Japanese manufacturers. The U.S. is an important market for the company, since it forms two-thirds of the net shipments, and 36% of the valuation of the company, as per our estimates. We currently expect the country’s heavyweight motorcycle market to grow at 4% CAGR through 2020, and Harley’s market share to drop from 52% in 2015, to 48% in 2020.
However, the situation could change going forward, and the pricing advantage to Harley’s competitors could only be a temporary headwind, especially as the Milwaukee-based manufacturer hasn’t gone for aggressive discounting to keep up with competition. In addition, lighter and cheaper bikes such as the Street 500 and Street 750, could significantly increase volume sales. The U.S. heavyweight motorcycle market could grow at a CAGR of 6% through 2020, and Harley’s share decline could stall, especially due to the smaller bikes and if foreign currencies start gaining momentum. The company’s U.S. market share could reach 51% in 2020, which is still lower than 2015’s figure of 51.9%. Moreover, with foreign currencies gaining momentum, Harley will be allowed to raise its model prices, at least in line with inflation. In effect, higher revenues and more volume sales would also lift the gross profit, and also impact the margin since Harley-Davidson has a considerable amount of fixed costs.
In this scenario, there could be a 10% increase in Harley-Davidson’s equity valuation, as per our estimates.
- With Rate Cuts Around The Corner, Can Harley-Davidson Stock Recover To Over $50?
- Will Harley-Davidson Stock Return To Pre-Inflation Shock Highs?
- Can Harley-Davidson Stock Rise Over 50% To Pre-Inflation Shock Levels?
- What’s New With Harley-Davidson Stock?
- Harley-Davidson Stock Had A Stellar 2022. What Does 2023 Hold?
- What’s Happening With Harley-Davidson Stock?
Have more questions on Harley-Davidson? See the links below.
- 2015 Year In Review: Harley-Davidson
- What Will Be The Impact On Harley-Davidson’s Valuation If Motorcycle Sales In The US Decline?
- What’s Harley-Davidson’s Fundamental Value Based On Expected 2016 Results?
- What Is Harley-Davidson’s Revenue And Gross Profit Breakdown?
- By What Percentage Have Harley-Davidson’s Revenues And Gross Profit Grown Over The Last Five Years?
- How Has Harley-Davidson’s Revenue And Gross Profit Composition Changed Over 2012-2016E?
- Where Will Harley’s Revenue And Gross Profit Growth Come From Over The Next Three Years?
Notes:
See More at Trefis | View Interactive Institutional Research (Powered by Trefis)