Morgan Stanley sees 35% upside in shares of your favourite motorbike company

on Mar 21, 2023
  • Morgan Stanley sees upside in Harley-Davidson Inc to $50 a share.
  • Analyst Adam Jonas explained his bullish view in a research note today.
  • Harley-Davidson stock is currently down about 5.0% year-to-date.

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Harley-Davidson Inc (NYSE: HOG) is trading meaningfully up on Tuesday after a Morgan Stanley analyst turned bullish on shares of the motorcycle manufacturer.

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Harley-Davidson stock has upside to $50

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Adam Jonas upgraded the Wisconsin-based company this morning to “overweight” and announced a $50 price target that suggests a 35% upside on its previous close.

The bullish call is based primarily on the company’s focus on its core motorcycle business. His research note reads:

We upgraded Harley-Davidson stock to overweight on confidence in the hardwire strategy, containment of electrification risks and attractive valuation.

The stock market news arrives a month after Harley-Davidson reported its financial results for the fourth quarter that handily topped Street estimates. At writing, its shares are trading about 5.0% below the price at which they started the new year.

Harley-Davidson stock is inexpensive to own

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At about eight times forward, Jonas says the Harley-Davidson stock is inexpensive versus its historical valuation especially considering its free cash flow yield and top-line growth.

More importantly, he expects its multiple to hold better amidst the looming economic downturn as the company serves a higher-quality consumer. The Morgan Stanley analyst has confidence in the leadership of CEO Jochen Zeitz.

Zeitz used the crisis [COVID] to drive improved efficiency in the HOG business mode, including rationalizing product lines, consolidating the dealer network, concentrating growth initiatives, and carving out LiveWire business.

Harley-Davidson spun off LiveWire – its electric motorcycle business last year via a $1.8 billion SPAC merger. LiveWire shares are currently up roughly 25% versus the start of 2023.

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