Baird downgrades Harley stock after dealer check
Baird analysts downgraded Harley-Davidson shares last week after a series of dealer checks that revealed concerning trends in Q3, including weak retail sales, an excess of inventory, and negative sentiment among dealers and customers, Investing.com reports.
According to Baird, dealers reported significant retail declines, with a double-digit percentage drop in sales. The investment firm believes that a decline is likely in the mid-single-digits. Still, the more concerning issue for the industry is the fallout from a challenging economy with high interest rates and excessive inventory levels.
High interest rates have been a deterrent for many dealers, and Baird says that consumers, in general, have been reluctant to finance expensive purchases at rates nearing 10%. The report also highlighted dealer concerns about inventory levels, with most of them indicating that stock is too high, leading to significant discounting and a race to the bottom on pricing.
“Our work also suggests that powersports dealers generally have more wood to chop to balance inventory. Net, we see risk to 2024 shipment guidance and cut our 2024/2025 shipment forecast,” according to Baird analysts.
The Investing.com report says that dealer sentiment has reached record lows, and we have also heard from a few Harley dealers that they have concerns. This dissatisfaction was highlighted in an August report by The Wall Street Journal, as dealers voiced frustration with Harley’s policies, which some claim are leading to dealership closures and financial strain similar to the 2008-09 recession.
Harley-Davidson management expects motorcycle revenue to be down about 7% y-y in 2024.
Source: Investing.com, Wall Street Journal
