Summary: OVERPRICED
Score: 4/20
MOS: 1%
Share Price: $35
Sticker Price: $36
Is Harley-Davidson stock a good buy?
Harley-Davidson is a motorcycle manufacturer founded in 1903, and headquartered in Milwaukee, WI.
Here are some interesting facts on Harley-Davidson…
- The company started to take off during World War I. In 1917 the US Military purchased 20,000 motorcycles.
- In 1917 they started making bicycles as a strategy to get customers to upgrade to motorcycles. Unfortunately this strategy never worked and they discontinued bicycles in 1923.
- By 1920, they became the largest motorcycle manufacturer in the world. with dealers in 67 countries.
- To survive the Great Depression of the 1930’s they built industrial powerplants based on their motorcycle engines. They also built three-wheeled delivery vehicles called Servi-cars which remained in production until 1973.
- During World War II they produced 90,000 military motorcycles.
Harley-Davidson has been a staple for decades but what happened to this company? I did a little homework and this article from Kiplinger.com gives the perfect explanation.
Unfortunately, the baby boomer generation is reaching an age where they can no longer ride their heavy duty Harley-Davidson motorcycles and the generations after baby boomers (Gen X and Millennial) aren’t buying these bikes. There is a major problem where used and new inventory isn’t moving. The demand just isn’t where it used to be.
Covid-19 has caused people from all over the world to travel less which means they’re spending money on home improvements and toys such as boats, ATVs, motorcycles, etc. If Harley-Davidson isn’t moving inventory now, when we get past Covid-19, things may look even worse for this company.
The motorcycle brands that are selling well today include Honda, Kawasaki, Polaris, Suzuki, and Yamaha. These are smaller, cheaper, and sportier bikes. If Harley-Davidson wants to keep up, they should be looking into manufacturing different product lines or acquire a small competitor that focuses on smaller bikes.
Now let’s take a look at the financials. Remember, Tykr analyzes 5 years of historical data. Let’s take a look at the last 4 quarters.
Revenue (Found on the Income Statement)
Q1 2020 = $1.2B
Q2 2020 = $865M
Q3 2020 = $1.1B
Q4 2020 = $725M
Revenues are volatile but the last quarter shows a sharp decline.
Net Income (Found on the Income Statement)
Q1 2020 = $69M
Q2 2020 = -$92M
Q3 2020 = $120M
Q4 2020 = -$96M
Net income shows a sharp decline in the last quarter. This is one reason why the share price is doing so poorly.
EPS (Found on the Income Statement)
Q1 2020 = .45
Q2 2020 = -.42
Q3 2020 = 1.04
Q4 2020 = -.17
EPS is declining. This is a reason why the MOS is so bad.
Net Change in Cash (Found on the Cash Flow Statement)
Q1 2020 = $669M
Q2 2020 = $3.1B
Q3 2020 = $2.8B
Q4 2020 = $2.5B
The Net Change in Cash is actually looking really good. This is surprising. They should use this cash to manufacture smaller bikes or make an acquisition. Now is the time to make a move or they could slowly see this cash dry up.
Total Assets (Found on the Balance Sheet)
Q1 2020 = $11.1B
Q2 2020 = $13.1B
Q3 2020 = $12.5B
Q4 2020 = $12B
The Total Assets are holding steady.
Total Liabilities (Found on the Balance Sheet)
Q1 2020 = $9.4B
Q2 2020 = $11.5B
Q3 2020 = $10.7B
Q4 2020 = $10.2B
The Total Liabilities are also holding steady.
Total Debt (Found on the Balance Sheet)
Q1 2020 = $4.4B
Q2 2020 = $6.4B
Q3 2020 = $6.1B
Q4 2020 = $5.9B
The Total Debt is shows a slight decline in Q4.
Total Equity (Found on the Balance Sheet)
Q1 2020 = $1.6B
Q2 2020 = $1.6B
Q3 2020 = $1.7B
Q4 2020 = $1.7B
The Total Equity is holding steady.
Harley-Davidson needs to make some changes if they want to survive. The score of 4/20 is justified. People aren’t buying Harley-Davidson’s like they use to. To keep up with the competition, they need to introduce new product lines that compete with brands like Honda, Kawasaki, Polaris, Suzuki, and Yamaha. If this stock resides within your portfolio, this may be a good time to sell.
—
The Summary, Score, and MOS of this stock may have changed since the posting of this review. Please login to Tykr to see up-to-date information.