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Harley-Davidson (HOG - Free Report) has been the symbol of the mid-life crisis for decades and has profited off the Baby Boomers, but there is a new group of consumers in town and their set of demands are shifting. The Chopper is going out of style and, unfortunately, leading its progenitor, Harley-Davidson, out with it. Analysts continue to pessimistically lower its already deflated EPS estimates for this seemingly antiquated stock, pushing HOG down to a Zacks Rank #5 (Strong Sell).
The End Of An Era
Harley-Davidson hit its peak sales and profitability in 2014 and has since been experiencing a decline. The massive demographic shift in consumption is catalyzing this demand slump. Millennials recently overtook Boomers as the largest consuming generation, and they are making some profound changes to the retail landscape (e.g., the retail apocalypse). One of the unfortunate victims of this consumption change has been Harley and its iconic motorcycles.
This is not to say the Harley isn't making an effort to shape their brand image around the evolving consumer. The company has come out with a line of fully electric bikes and has a pipeline of sleek new designs and an eBicycle, which are to be released next year.
These brand-changing efforts may be fruitless as millennials and younger generations turn against some of the brands of their parents' and grandparents' generations as they are no longer "fashionable." Unfortunately, I don't believe Harley will be able to shake its chopper brand association quickly.
COVID, Financials & Chart
Harley has experienced 9 straight quarters of topline declines, with its profits tumbling from $254 million in the second quarter of 2018 to a ($68) million decline this past quarter. COVID-19 pummeled Harley's sales and drove the company's bottom line to its lowest level in the company's public history.
This most recent recession was very different from the systemic financial downfall, and I would have thought Harley Davidson would have fared much better in this medically induced recession.
With mortality at the forefront of many consumers' minds, I think there is more demand for "exciting" purchases like Tesla's (TSLA - Free Report) and Malibu Boat's (MBUU - Free Report) , with their respective stocks reaching all-time highs this year.
This stock's drop accentuates the downward trend HOG has been experiencing since mid-2014, and its all-time high remains in 2006. HOG is trading 53% below that high. The stock has seen a recent boost on the implication of a recovery trade. HOG has marginally recovered to pre-COVID levels, despite its earning estimates not projecting to reach its 2019 levels for years.
Now is the time to pull profits off this mature Baby Boomer brand that is on its way out without significant system changes in its brand recognition. HOG has more than doubled since its 2020 bottom, and it's time to pull those profits.
(Chart from tuner)
HarleyDavidson, Inc. Price, Consensus and EPS Surprise
People are no longer excited about Harley's anymore. The business appears to be hitting a level of obsolescence as it looks at its glory days in the rearview mirror.
There is still a glimmer of hope that this motorcycle giant will be able to rebrand itself into something millennial-friendly. The success of this year's product releases will be telling in whether the company can evolve with the progressing consumer.
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Bear Of The Day: Harley-Davidson (HOG)
Harley-Davidson (HOG - Free Report) has been the symbol of the mid-life crisis for decades and has profited off the Baby Boomers, but there is a new group of consumers in town and their set of demands are shifting. The Chopper is going out of style and, unfortunately, leading its progenitor, Harley-Davidson, out with it. Analysts continue to pessimistically lower its already deflated EPS estimates for this seemingly antiquated stock, pushing HOG down to a Zacks Rank #5 (Strong Sell).
The End Of An Era
Harley-Davidson hit its peak sales and profitability in 2014 and has since been experiencing a decline. The massive demographic shift in consumption is catalyzing this demand slump. Millennials recently overtook Boomers as the largest consuming generation, and they are making some profound changes to the retail landscape (e.g., the retail apocalypse). One of the unfortunate victims of this consumption change has been Harley and its iconic motorcycles.
This is not to say the Harley isn't making an effort to shape their brand image around the evolving consumer. The company has come out with a line of fully electric bikes and has a pipeline of sleek new designs and an eBicycle, which are to be released next year.
These brand-changing efforts may be fruitless as millennials and younger generations turn against some of the brands of their parents' and grandparents' generations as they are no longer "fashionable." Unfortunately, I don't believe Harley will be able to shake its chopper brand association quickly.
COVID, Financials & Chart
Harley has experienced 9 straight quarters of topline declines, with its profits tumbling from $254 million in the second quarter of 2018 to a ($68) million decline this past quarter. COVID-19 pummeled Harley's sales and drove the company's bottom line to its lowest level in the company's public history.
This most recent recession was very different from the systemic financial downfall, and I would have thought Harley Davidson would have fared much better in this medically induced recession.
With mortality at the forefront of many consumers' minds, I think there is more demand for "exciting" purchases like Tesla's (TSLA - Free Report) and Malibu Boat's (MBUU - Free Report) , with their respective stocks reaching all-time highs this year.
This stock's drop accentuates the downward trend HOG has been experiencing since mid-2014, and its all-time high remains in 2006. HOG is trading 53% below that high. The stock has seen a recent boost on the implication of a recovery trade. HOG has marginally recovered to pre-COVID levels, despite its earning estimates not projecting to reach its 2019 levels for years.
Now is the time to pull profits off this mature Baby Boomer brand that is on its way out without significant system changes in its brand recognition. HOG has more than doubled since its 2020 bottom, and it's time to pull those profits.
(Chart from tuner)
HarleyDavidson, Inc. Price, Consensus and EPS Surprise
HarleyDavidson, Inc. price-consensus-eps-surprise-chart | HarleyDavidson, Inc. Quote
Final Thoughts
People are no longer excited about Harley's anymore. The business appears to be hitting a level of obsolescence as it looks at its glory days in the rearview mirror.
There is still a glimmer of hope that this motorcycle giant will be able to rebrand itself into something millennial-friendly. The success of this year's product releases will be telling in whether the company can evolve with the progressing consumer.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
See these 7 breakthrough stocks now>>