Is Harley-Davidson a Good Investment?

OVERVIEW

Harley-Davidson Incorporation designs, manufactures, and sells motorcycles to consumers all over the world. They sell touring, sports, cruiser, and standard motorcycles as well as the products and services needed to use and maintain those bikes. They also have started to grow into the electric bike space with their first model being available to customers. Harley-Davidson also offers some financial services to consumers who purchase products.

Why You Should?

  1. Harley-Davidson ousted their CEO and appointed a new one who will be assigned to restructure the company into the future. The company now has slashed its inventory to focus on popular models as well as cutting costs and investing in the future of motorcycles. If this restructuring works, Harley-Davidson will be back at the forefront of the motorcycle industry.
  2. Harley-Davidson has extremely strong brand recognition around the world. Consumers know that owning a Harley-Davidson bike is a status symbol and being a part of the American culture. This strong recognition will benefit Harley-Davidson’s future growth as consumers will tend to buy its products over the competitors due to this brand.
  3. Harley-Davidson used the money that it divests from unpopular models to move into the future of the motorcycle industry. They have been developing and entering the electric motorcycle space. As consumers and governments look to reduce the impacts of climate change, Harley-Davidson will see a spike in sales of their new EV bikes. This will benefit the company in the future.
  4. Harley-Davidson has an extremely loyal consumer base. Its consumers are extremely satisfied with the products that the company offers and are more likely to continue purchasing Harley-Davidson bikes over the ones that competitors have to offer. This will benefit the company’s future growth.
  5. Harley-Davidson is in a unique position during this pandemic as consumers want a good way to spend their time away from work in a safe manner. Some have decided to buy a motorcycle and go to different locations on them. Because of this trend, Harley-Davidson has been less impacted than traditional automobile manufacturers.

Why You Should Not?

  1. Harley-Davidson faces tough competition from other motorcycle manufacturers like Ducati, Honda, and other electric motorcycle companies. However, the king in the EV space, Tesla, will not develop a motorcycle in the mid-term as it focuses on other products. Elon Musk also mentioned how Tesla will not make a motorcycle because it is unsafe.
  2. The COVID-19 Pandemic has hurt the company’s sales of motorcycles and other services as economies around the world weaken due to the pandemic. Consumer's demand for vehicles have gone down considerably as they do not need to leave their homes frequently. This has negatively impacted Harley-Davidson and will continue to do so until the conditions in the economy improve.
  3. The company has seen falling sales numbers which has led to lower revenues and profits before this pandemic as they discovered low demand for motorcycles from Millenials. They have just started to introduce products like their line of EV bikes in an attempt to capitalize on this demand. This falling revenue and profit will negatively impact the company and its balance sheet. In the financial year of 2019, the company reported revenues of around 5.36 billion and profits of around 423.6 million. Both of these metrics are lower than what the company reported in the financial year of 2018 when they had revenues of around 5.7 billion and profits of around 531.45 million.

MY OPINION

In my opinion, I think that Harley-Davidson will become a strong company once it is able to restructure to better capitalize on the new demand for EV motorcycles. Their strong brand and a loyal customer base will help them grow into the future. However, a weak balance sheet caused by falling revenues and profits as well as the COVID-19 Pandemic has hurt the company.

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Aaditya Patel

Aaditya Patel

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.