In a research note on Tuesday, Citi analysts upgradedHarley-Davidson’s stock and revved up their price target for the iconic motorcycle maker.
Analysts changed its rating for the company to “buy” from “hold” and raised the price target to $55 from $50.
During the last few months, the company’s stock has increased due to strong fourth-quarter sales results. Analysts expect retail sales momentum to rise even more in the first quarter.
“We would have expected March to have meaningfully slowed, given demand was pulled forward into December to February with warm weather,” the report said. “Excluding warm weather for the quarter, we sense the underlying sales momentum remains strong.”
The report added that Citi’s dealer checks suggested that retail inventories remain lean, which should bring some scarcity back to the company’s brand.
“We are impressed with management’s focus on maintaining inventory discipline, as well as its ability to drive sales,” the report said. “In addition, retail credit availability has remained stable to slightly improved over the last few months.”
About 50 percent of all new motorcycles sold in the U.S. and 33 percent of worldwide heavyweight motorcycles are sold by the company. Analysts added that they believe “the company is well positioned to capitalize on the industry trends, as it has the strongest brand recognition and the most loyal customer base within the industry.”
The report identified several factors that could cause the stock to surpass analysts’ target price, including success in attracting younger riders and women, higher demand, higher-than-expected operating efficiencies, and shipments that match retail sales growth successfully.
Analysts also detailed several risks that could cause Harley-Davidson stock to fall short of the report’s $55 price target; these include softer U.S. retail demand, international sales deterioration, and interest rate increases that could be unfavorable to retail demand.
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Within the past 12 months, Citigroup Global Markets or its affiliates has acted as manager or co-manager of an offering of securities of Harley-Davidson and received compensation for investment banking services provided within the past 12 months from Harley-Davidson. Citigroup Global Markets or its affiliates expects to receive or intends to seek, within the next three months, compensation for investment banking services from Harley-Davidson. Citigroup Global Markets or an affiliate received compensation for products and services other than investment banking services from Harley-Davidson in the past 12 months. Citigroup Global Markets currently has, or had within the past 12 months, the following as investment banking client(s): Harley-Davidson. Citigroup Global Markets currently has, or had within the past 12 months, the following as clients, and the services provided were non-investment banking, securities-related: Harley-Davidson.
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