Why Harley-Davidson’s Stock Crashed — and Why It Won’t Soon Recover

Harley-Davidson (NYSE:HOG) stock has tumbled 7% given third-quarter gain were reported final week and is down over 36% from progressing this year when trade fight fears strike a shares. But a heading motorcycle manufacturer has mislaid a approach in a U.S. motorcycle market, and a skeleton to repair a problem are so distant out in a destiny that it might be years before we see any turnaround.

Revenues for a duration rose scarcely 17% to $1.12 billion as it shipped some-more new indication year motorcycles to dealers here and abroad, and Harley reported a net income of $113.9 million, or $0.68 per share, forward of analysts’ expectations of gain of $0.53 cents per share on income of $1.07 billion. 

U.S. sales of Harley-Davidson motorcycles crashed and burnt in a third quarter. Image source: Getty Images.

In several general markets Harley-Davidson was means to see sales growth, posting 3% expansion in Europe, where it’s gaining marketplace share, and enjoying double-digit expansion in China, Brazil, and Mexico, nonetheless these are away really tiny markets.

Here’s where it gets ugly

Yet for a seventh true entertain — and a 14th out of a final 15 buliding — domestic sales of motorcycles fell, this time by 13.3% to 36,220 bikes. Not even during a misfortune tools of a retrogression a decade ago did Harley sell so few motorcycles in a third quarter.

Data source: Harley-Davidson quarterly SEC filings.

This is a certain pointer that Harley-Davidson has no thought how to sell motorcycles in a U.S. anymore. Today’s younger, urban, and some-more womanlike riders are looking for smaller, lighter, and reduction costly bikes, though Harley continues to furnish big, heavy, costly models. While it pronounced a lowest-priced motorcycle starts during $6,900 and it has 7 Sportsters underneath $12,000, it also remarkable prices on a new 2019 models are adult 2.5% over final year.

There’s no doubt Harley is held in an industrywide unemployment that’s saying a whole marketplace dragged down, though a 9.8% decrease in sales for motorcycles with engines 601 cubic centimeters and incomparable was decidedly improved than a bike maker’s drop. Harley expects a marketplace and itself to onslaught good into 2019, and it is counting on a More Roads to Harley-Davidson highway map for a destiny to assistance residence a downturn.

And this comes as Polaris Industries (NYSE:PII) was still means to news single-digit expansion in Indian motorcycle sales. Sure, that’s good subsequent a double- and triple-digit sales expansion Polaris was saying early on when it brought behind a Indian nameplate, though it is still saying growth.

Moreover, Harley faces new rival pressures from Indian (the country, not a brand) motorcycle builder Royal Enfield, that is entering a U.S. marketplace with its small, low-cost, high-performance bikes, a new twin-cylinder Interceptor 650 and Continental GT 650 Twin, both labelled during $5,800.

How Harley-Davidson could recover

Harley is counting on its opening into new markets to retreat a slide. Its LiveWire electric motorcycle is due out subsequent year, and it sees avenues like journey furloughed and a new streetfighter bike as assisting to deliver new riders to a code to boost sales.

Although a marketplace for large, absolute electric motorcycles is probably nonexistent, Harley sees it as one that could offer essential expansion opportunities that could enhance 50% annually by 2020.

Similarly, a journey furloughed and streetfighter category has a estimable following in Europe, quite among immature and new riders and women. The expansion intensity there is smaller, some 8% annually, but it can assistance Harley-Davidson strike a idea of creation general markets comment for 50% of a worldwide volume.

Why it won’t assistance in a brief term

As noted, there’s no existent marketplace here or abroad for a motorcycle like a LiveWire. A lot is going to come down to e-bikes’ specs, to what arrange of energy and operation these bikes will have. But there’s no infrastructure in place nonetheless to support them, so long-distance rides will not be happening, that means they’re going to be a extra bike for most.

As for a journey furloughed and streetfighter bikes, these are markets good serviced by other brands, so there’s no pledge a Harley will ring with buyers. Also, this is a marketplace for midsize bikes, and Harley’s due new models widen that definition.

The biggest problem might be that other than a LiveWire, nothing of a bikes are scheduled to start attack a marketplace until 2020 during a earliest.

The bottom line

The turnaround story isn’t an easy one to grasp yet. The U.S. is still Harley-Davidson’s biggest marketplace by far, and a accelerating sales decrease is worrisome since a trend could worsen. So as bad as a gain news looked, it is going to get worse before there’s any possibility it can get better, and it has to infer that a devise can indeed work.

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