Harley Cruises on Upgrade

Harley-Davidson (NYSE:HOG) climbed Tuesday after Morgan Stanley upgraded the stock to overweight from equal weight, citing Harley’s focus on the core business and a better-off consumer. The firm’s price target of $50 implies a 33.2% upside from Monday’s close.

Analyst Adam Jonas and team also have increased conviction in Chairman and CEO Jochen Zeitz's focus on generating cash flow from the core motorcycle business, while also prudently managing the risks of the Livewire business.

"Taking over as CEO at the start of COVID, Jochen Zeitz used the crisis to drive improved efficiency in the HOG business model, including rationalizing product lines, consolidating the dealer network, concentrating growth initiatives, and carving out the LiveWire business. Other changes include providing stock options to factory workers and focusing the business on its highly loyal core motorcycle market."

The positive view on HOG from Morgan Stanley includes much of the negative outlook already being priced in for the captive finco.

The firm thinks HOG's stock price is attractively valued relative to the past five years at ~8.6X 2023 P/E and ~5.1X 2023 industrial EBITDA. Amid a potential downturn, Morgan Stanley believes HOG's multiples should hold better in comparison to prior recessions. Morgan Stanley assigned a price target of $70 to HOG.

Last week brought tidings that Jefferies was upgrading HOG’s rating, having stepped away from its previously bearish rating on the stock as a double-digit drop in recent days has balanced the risk/reward.

HOG opened Tuesday trading up $1.51, or 3.8%, to $41.38.