Baird turns bullish on Harley-Davidson for the first time in 5 years

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Milwaukee-based financial services company Baird has a bullish outlook on Harley-Davidson, Inc. after not recommending the stock since 2016.

Harley-Davidson has struggled in recent years with declining sales as older riders exit the sport, used motorcycle prices make new bikes less appealing and as competition for time and attention increases.

The motorcycle maker spent much of 2020 resetting its operations through The Rewire, which coincided with several changes to Harley’s leadership team. The company also recently shared insight on The Hardwire, a five-year strategic plan that leaders say will make Harley more competitive.

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Part of the company’s strategy includes optimizing its dealer network, driving scarcity and desirability back into the brand and a new leadership team with a fresh vision and proven track record – three reasons that have made Baird analysts optimistic about Harley’s future.

The Hardwire also involves launching a used bike program, creating a separate division for electric vehicle development, and extending employee ownership through equity grants offered to all 4,500 employees.

“We increasingly like the fundamental case for Harley-Davidson, a stock we have not recommended since 2016, and are looking for an opportunity to be move aggressive,” Baird analysts stated in the report.

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However, Baird’s research team discovered that Harley dealers are frustrated over slow deliveries. Baird surveyed several Harley dealers, but did not disclose dealers quoted in the survey.

“The market is strong and the desire to ride is very good, but it seems we are fighting our manufacturers instead of being partners at this point. Maybe if they simply told us the truth as to inventory, we wouldn’t be so frustrated,” one dealer said.

Supply chain shortages exist for many original equipment manufacturers in the United States, which may be part of the problem, the Baird report states.

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Despite dealer frustrations, shares of Harley stock traded at $36.40 just before Baird changed its recommendation. The price has since climbed to around $40.60 per share as of noon on Monday. Baird has set a price target of $45 for Harley’s stock.

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