Harley-Davidson wants to build electric bikes - but a widely followed Wall Street analyst says there's a better way for the struggling motorcycle brand to re-invent itself
- Harley-Davidson unveiled two electric concepts last week, with one aimed directly at city-dwellers.
- Those come ahead of the company's hotly anticipated launch of its first full-size electric motorcycle later this year.
- But it may be too little too late, says Adam Jonas of Morgan Stanley. Instead, he suggests the brand look to four wheels.
Harley-Davidson is going electric. It has to.
In the face of four years of declining sales, the iconic motorcycle brand is set to launch its first full-size electric motorcycle later this year - and has even more electric concepts aimed at city-dwellers in the pipeline.
But Adam Jonas, a widely followed automotive analyst for Morgan Stanley, says the Wisconsin-based brand's efforts might be better focused on things with four wheels.
Brand authenticity is basically the only thing Harley has going for it. After all, the 116-year-old brand is known worldwide and its hardcore fanatics stock up on merchandise like a child at Disneyland.
The full-size pickup truck market - easily one of the most lucrative for automakers - hit 2.4 million units in 2018, Jonas says. And with Ford, GM, Chevrolet, and Ram accounting for 93% of that volume, Jonas asks: "Could there be room for more than just these 4 brands?"
This doesn't mean Harley would have to learn how to build four-wheelers. There's already been a Harley-branded F-150 for more than two decades. And a silent motorcycle is one that Jonas and his team on Wall Street "struggle" to conceptualize. Instead, the team is "exploring the possibility of the brand being valuable to an established or emerging auto manufacturer."
Can four-wheelers save Harley?
Maybe.
President Trump's ongoing trade war with China all but wiped out the company's 2018 profit, and the outlook for most of Wall Street is grim.
Jonas and his $50 target isn't the most optimistic on Wall Street, but it is near the top. The stock, down 25% in the past year, has only six "buy" recommendations from analysts polled by Bloomberg, while 15 others recommend hold, and only one says sell.
Consensus on the Street isn't for more declines, but it's not very optimistic, either. The average price target of those analysts is just $39 - about 8% higher than Wednesday's prices.
"While the secular pressures facing the motorcycle industry appear to be well-entrenched… even outweighing strong macroeconomic, employment, and credit tailwinds in the core US market," writes Jonas.
"We believe the current share price offers upside to fair value on the basis of the cash generative properties of the core business as well as the potentially untapped potential of the Harley-Davidson brand. "