Sell Harley Stock, Analyst Says. 2 Factors ‘Overwhelming’ the Motorcycle Industry.

Harley-Davidson stock is down 6% this year and 11% over the past 12 months. (AFP via Getty Images)

Key Points

• Morgan Stanley downgraded Harley-Davidson stock to Sell from Hold, lowering its price target to $25 from $27.
• Harley-Davidson shares were down 2% in early trading and have fallen 6% this year and 11% over the past twelve months.
• Analyst Stephen Grambling cited lagging leisure demand, low pricing power, and weak secular trends as reasons for the downgrade.

Cruising on a Hog down an open road, the wind whipping, the sun shining…it’s a tough sell these days. And that isn’t great for motorcycle maker Harley-Davidson .

On Monday, Morgan Stanley analyst Stephen Grambling downgraded the stock to Sell from Hold and lowered his price target to $25 from $27.

“Leisure lagging,” wrote Grambling in a report.

Harley shares were down 4.3% Monday, to $26.99. The S&P 500 and Dow Jones Industrial Average were up 0.8% and 0.4%, respectively. Harley is down 6% this year and 11% over the past 12 months.

Barron’s hung a “For Sale” sign on Harley back in 2017, when the stock was twice its present level and the market one-third its current height. Harley retail sales have fallen 5% annually, as the baby boomer buyers of its expensive bikes age. A battery-powered product line loses over $50 million a year. Tariffs burden costs. In this year’s first half Harley’s motorcycle sales fell 28%.

Stocks such as Harley haven’t recovered as much as others since April’s market lows, kept down by affordability worries—buying a high-ticket item in a time of dogged inflation and higher interest rates.

Low pricing power and weak secular trends, with slower motorcycle demand growth since the pandemic, are “overwhelming a cyclical recovery for the motorcycle industry,” added Grambling, “With [earnings] estimates likely to come down, we see the multiple moving down.”

Harley stock currently trades for about 10.6 times estimated 2026 earnings, up from about 7.6 times a year ago.

Grambling isn’t alone in his relatively bearish view.

Overall, 31% of analysts covering the stock rate shares Buy, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target for Harley stock is about $30 a share.

A downgrade to Sell doesn’t change the Buy-rating ratio. Now, about 12% of analysts covering Harley stock rate shares Sell. The average Sell-rating ratio for stocks in the S&P 500 is about 7%.

Grambling may have taken Harley’s rating to a Sell, but he barely cut his price target, trimming it from $27 to $25. Yet the Morgan Stanley analyst reduced his earnings forecast by 30%. And that forecast may prove optimistic.

Earlier this year, Harley sold almost 10% of its finance business, and two-thirds of its finance receivables to KKR and Pimco Investment Management. Finance has contributed about half of Harley’s earnings recently, so the transaction traded away around 25% of earnings for a one-time gain that Harley will use to buy back stock and debt.

As UBS analyst Robin Farley has pointed out, in her Neutral-rating notes, the KKR deal will only prove wise if the motorcycle maker can turn around its skidding sales.

Write to Al Root at allen.root@dowjones.com