Harley-Davidson Stock Had A Stellar 2022. What Does 2023 Hold?

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Harley-Davidson

Harley-Davidson (NYSE:HOG) stock had a solid 2022, rising by about 10% over the year, faring better than the broader automotive sector and also the S&P 500 which remained down by roughly 19%. Like most other automotive players, Harley, too, was weighed down by a host of external factors including component shortages, rising inflation, and concerns about the global economy. However, there have been a couple of factors that have helped the stock outperform. Firstly, the company’s “Hardwire” strategic plan has resonated with investors. Under this plan, the company has prioritized growing its earnings per share by low double-digits through 2025, by focusing on higher-margin motorcycles (including Touring bikes, large Cruiser, and Trike) and more profitable geographic areas. The company’s move to build and spin off its electric bike startup LiveWire last September has also been positive. Now although LiveWire stock has underperformed since it went public, declining by over 25% since it was listed, Harley holds a 74% stake which could help it to de-risk its prospects as the automotive industry goes electric. Moreover, Harley’s Q3 2022 results were also stronger than expected, with the company reaffirming its 2022 outlook, projecting motorcycle revenue growth of between 5% and 10% for the full year.

Even following last year’s gains, Harley’s valuation appears reasonably compelling at current levels of roughly $45 per share, considering that it trades at just about 9x forward earnings. Harley’s dividend yield of about 1.4%, although not generous, is well covered by the company’s financials and this could be making the stock a bit more attractive to value investors in the current rising interest rate environment. That being said, there are risks as well. Multiple indicators point to a recession in the near term, with the Federal Reserve continuing with its path of rate hikes. Auto stocks typically see meaningful drawdowns during recessions and this could hurt Harley. We value HOG stock at about $55 per share, about 20%  ahead of the current market price. See our analysis on Harley- Davidson Valuation: Expensive or Cheap for more details. Also, check out our analysis of Harley-Davidson Revenue for more information on the company’s key revenue streams and how they are trending.

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 Returns Jan 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 HOG Return 8% 8% -23%
 S&P 500 Return 4% 4% 78%
 Trefis Multi-Strategy Portfolio 9% 9% 241%
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  3. Will Harley-Davidson Stock Gain Post Q2 Results?
  4. Forecast Of The Day: Harley Davidson’s Wholesale Motorcycle Shipments
  5. Will Harley-Davidson Stock Gain Post Q1 Results?
  6. Harley-Davidson Stock Looks Like Great Value At $40

[1] Month-to-date and year-to-date as of 1/18/2023
[2] Cumulative total returns since the end of 2016

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