Coronavirus Will Hurt Harley-Davidson’s Top Line But The Stock Has A Potential Upside of 30%

by Trefis Team
+26.51%
Upside
23.69
Market
29.97
Trefis
HOG
Harley-Davidson
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Comparing the trend in Harley-Davidson (NYSE: HOG) stock over recent months with its trajectory during and after the Great Recession of 2008, we believe that the stock can potentially gain 30% once fears surrounding the coronavirus outbreak subside. Our conclusion is based on our detailed comparison of Harley’s performance vis-à-vis the S&P 500 in our interactive dashboard analysis, ‘2007-08 vs. 2020 Crisis Comparison: How Did Harley-Davidson Stock Fare Compared with S&P 500?

The World Health organization (WHO) declared a global health emergency at the end of January in light of the coronavirus spread. Between January 31st and March 27th , HOG stock has lost 46% of its value (vs. about 23.6% decline in the S&P 500). A bulk of the decline came after March 6th, when an increasing number of Coronavirus cases outside China fueled concerns of a global economic slowdown. Matters were only made worse by fears of a price war in the oil industry triggered by an increase in oil production by Saudi Arabia.

Harley-Davidson’s Stock Has Fallen Because The Situation On The Ground Has Changed:

HOG stock has suffered as states and countries are on lockdown. As industries have halted production, the demand for automobiles have also taken a hit with consumers focusing solely on essentials and not discretionary products. We believe HOG’s Q1 and Q2 results will confirm this reality with a drop in revenues across all the segments. 

 

But Harley-Davidson Stock Fared Worse During The 2008 Downturn

We see HOG stock declined from levels of around $33.67 in October 2007 (the pre-crisis peak) to roughly $7.75 in March 2009 (as the markets bottomed out) – implying that the stock lost as much as 77% of its value from its approximate pre-crisis peak. This marked a higher drop than the broader S&P, which fell by about 51%.

However, HOG recovered strongly post the 2008 crisis to about $19.82 in early 2010 – rising by 155.6% between March 2009 and January 2010. In comparison, the S&P bounced back by about 48% over the same period.

 

Will Harley-Davidson’s Stock Recover Similarly From The Current Crisis?

Keeping in mind the fact that HOG’s stock has fallen by 46% this time lower than the 77% decline during the 2008 recession, we see a potential rebound of 30% to levels of around $23 once economic conditions begin to show signs of improving. This marks a partial recovery back to the $33 level HOG stock was at before the coronavirus outbreak gained global momentum. 

That said, the actual recovery and its timing hinge on the broader containment of the coronavirus spread. Our dashboard forecasting US COVID-19 cases with cross-country comparisons analyzes expected recovery time-frames and possible spread of the virus.

 

Further, our dashboard -28% Coronavirus crash vs 4 Historic crashes builds a more complete macro picture, and complements our analyses of Coronavirus impact on a sector peer like Ford. The complete set of coronavirus impact and timing analyses is available here.

 

 

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