Analyst says sell Harley-Davidson after finding weak summer sales
The shares of Harley-Davidson (HOG) are falling after Longbow downgraded the stock to Underperform, its equivalent of a sell rating, from Neutral. SALES LOOK WEAK: After analyzing information from motorcycle dealers, Longbow analyst David MacGregor believes that sales of Harley-Davidson's motorcycles are trending below expectations. As a result, he thinks that the company's wholesale sales are coming in at the low end of its guidance range. Moreover, the dealers say that their inventories are increasing, the analyst stated. ADDITIONAL HEADWINDS: The prices of used bikes have dropped 2%-4% over the summer, increasing demand for them, MacGregor wrote. Meanwhile, the company's new bikes have received "mixed reviews from dealers," the analyst reported. Finally, its stock has rallied recently while the company is facing increased competition, noted MacGregor, who set a $40 price target on Harley shares. WHAT'S NOTABLE: On August 1, BMO analyst Gerrick Johnson upgraded Harley-Davidson to Outperform from Market Perform. In the short-term, the motorcycle maker is a "good contrarian play," according to Johnson. Sentiment towards the shares is "extremely negative," as multiple firms have downgraded the stock and about 16% of the shares outstanding are now sold short, Johnson wrote. Over the longer term, the analyst is upbeat on Harley-Davidson's strategy of accelerating its development of new, "consumer focused" products, rather than lowering its prices. PRICE ACTION: In early trading, Harley-Davidson fell about 2% to $51.60 per share.