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Harley (HOG) to Gain From Launches, Facility Shift a Woe

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On Sep 10, we issued an updated research report on Harley-Davidson, Inc. (HOG - Free Report) .

This leading designer and manufacturer of heavyweight motorcycle has been making long-term investments to expand its product portfolio. By 2027, it aims to launch 100 motorcycles.

In July, Harley announced its decision to foray in middle-weight (500cc to 1250cc) and light-weight (250cc to 500cc) categories from 2020, except for its usual heavy-weight category. Widening its motorcycle portfolio will help the company to tap new riders, which is already struggling with the aging customer base and declining sales in its native country.

Harley-Davidson, Inc. Price and Consensus

 

In sync with this, the company has planned to set up an R&D facility in the Silicon Valley that is going to focus on developing its product portfolio, including the entire range of electric vehicles. Its first electric motorcycle LiveWire will be launched in 2019.

Further, in August, Harley announced that it is looking for partners in India to manufacture light-weight motorcycles for customers in India and other Asian markets. With rising discretionary spending, motorcycle sales in India are witnessing double-digit growth, giving motorcycle manufacturers ample chances to benefit from this prospect.

Along with product innovation, Harley is also bolstering dealer networks. It invests in marketing and sales support to attract riders and maintain the existing ones. Also, apart from using its own website to enhance the company’s digital capabilities, Harley plans to collaborate with leading e-commerce providers to allure customers.

Harley’s decision to shift manufacturing location of its motorcycles sold in Europe from the United States to international facilities is a concern. Ramping up production at these international hubs will require investments, which will lead to rise in costs for the company. Further, before the international hubs get upgraded, it has to keep paying high tariffs for the motorcycles imported to Europe. As of June, the company estimated tariff-related costs of roughly $30-$45 million for the rest of 2018.

Price Performance

In the past six months, Harley’s stock has lost 0.5%, outperforming 10.1% decrease recorded by the industry it belongs to.

 



 

Zacks Rank & Key Picks

Harley currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the auto space include PACCAR Inc. (PCAR - Free Report) , Allison Transmission Holdings, Inc. (ALSN - Free Report) and Fox Factory Holdings, Inc. (FOXF - Free Report) . PACCAR currently carries a Zacks Rank #2 (Buy) while Allison Transmission and Fox Factory sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PACCAR has an expected long-term growth rate of 10.8%. Over the past six months, shares of the company have gained 3.3%.

Allison Transmission has an expected long-term growth rate of 10%. Shares of the company have risen 34.2% in the past six months.

Fox Factory has an expected long-term growth rate of 16.8%. Over the past six months, shares of the company have gained 89.5%.

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