Should I buy Harley Davidson shares in December 2021?

By: Stanko Iliev
Stanko Iliev
Stanko dedicates himself to providing investors with relevant information they can use to make investment decisions. He loves the… read more.
on Nov 27, 2021
  • Harley-Davidson's business continues to perform well
  • US and EU ended a dispute on steel and aluminum tariffs
  • $40 represents current resistance

Harley-Davidson, Inc. (NYSE: HOG) shares continue to trade above $35 support after the US and the European Union ended a dispute on steel and aluminum tariffs.

Momentum remains strong

Harley-Davidson’s business continues to perform well, and the company’s momentum during the second quarter continued through the third fiscal quarter.

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Harley-Davidson reported financial results for the third fiscal quarter in the last week of October; total revenue has increased by 20.3% Y/Y to $1.16 billion, $10 million above expectations, while the GAAP earnings per share were $1.05 (beats by $0.37).

Revenue for the nine months of 2021 was $4.3 billion, which is 30% above of 2020 (the same period) and operating income for the nine months of 2021 was $831 million.

During its third-quarter earnings report call, its management announced that motorcycles segment guidance remains unchanged for the full fiscal year.

For the full year, Harley-Davidson expects Motorcycles segment revenue growth to be above 30%.

The operating income margin of the motorcycles segment should be between 6% to 8%, while the company also expects Financial Services segment operating income growth of 95% to 105%.

The positive news is that the US and the European Union ended a steel and aluminum tariffs dispute. Before this agreement, Harley Davidson was at risk of paying European tariffs as high as 56%, which would negatively influence its sale on the European market.

The board of directors declared a $0.15/quarterly share dividend last week (in line with the previous), and the current dividend yield stands around 1.6%.

On the other side, the Coronavirus pandemic continues to pose downside risks together with the supply chains crisis, and if the situation gets worse, Harley will not achieve its goals. Jochen Zeitz, CEO of Harley-Davidson, added:

Like the supply chain challenges are likely to continue into 2022, our team remains committed to managing the effects of the disruption, leveraging the scale of our global network and infrastructure to mitigate the impact on our business.

Harley Davidson is a stable company with a bright future, but investors should consider that if the US stock market enters a more significant correction phase, shares of Harley could be at much lower levels.

$40 represents current resistance

Data source: tradingview.com

Harley-Davidson shares are trading near monthly lows, and if the price falls below $35 support, the next target could be $33.

On the other side, if the price jumps above $40 resistance, it would signal trading shares, and the next target could be at $45 or even above.

Summary

Harley-Davidson’s business continues to perform well, but the coronavirus pandemic continues to pose downside risks together with the supply chains crisis. Revenue for the nine months of 2021 has increased 30% compared with the same period in 2020, and the board of directors declared a $0.15/quarterly share dividend last week.

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