UBS is as constructive on this stock as it has been in years

Evidence of a fundamental demand shift is needed from this player in the premium heavyweight motorcycle space, but UBS thinks cost savings and tariff reductions will help the company bridge to growth in 2026-27.The firm is as constructive on Harley Davidson (HOG) as it has been in years, it said in a recent note. “There are drivers in the next 12 months that are likely to give investors a reason to consider the stock while they get more visibility on HOG’s 3- to 5-year targets.” Harley Davidson is rated Neutral at UBS with a new, raised price target of $26 compared to the prior target of $19.The last five years saw a decline in retail because HOG eliminated the entry-level bikes that typically draw in new riders who would then trade up to the heavier-weight, more profitable bikes 12-18 months later.The Sportster was one such bike at a low price point that was eliminated, while another bike eliminated was the Road King. The Road King served as an on-ramp for riders who traded up into larger touring bikes, says management. The net consequence of eliminating these starter bikes was to push the entry-level MSRP to a steep $28K.At their recent meeting with UBS, management said that “the aging rider” is a false narrative about the typical Harley Davidson customer. Eliminating some bikes preferred by younger riders has pushed up the average rider age by 7 years, but the average age of buyers of HOG’s Touring bikes has not been increasing.The company intends to reintroduce cheaper entry-level bikes to bring customers back to the brand, and ultimately have them trade up.HOG has been trying to lure younger riders with their lightweight bikes for the last twenty years, say the analysts. But they note that this time it might be different because those lightweight bikes were designed for the Indian market rather than for U.S. customers.The used market prices for Sportsters, which are pretty close to their original sale price a few years ago, indicate that there is still strong demand. These bikes were discontinued because they were not profitable, and were also non-compliant with the new European Commission standards.The company has indicated that those issues have now been resolved. The bikes were redesigned, and components were secured from the same suppliers but at new, lower prices. Dealers are expressing optimism about demand for the Sportster, says UBS, and the company is treating it as important to their strategy this time.Harley-Davidson is also increasing its participation in the used market. The used market does 4-5x times the business done by the company each year, with 4x more bikes traded for every one new Harley sold in the U.S. UBS says the company can become involved in used bike auctions, get dealers more involved in the certified pre-owned program, or even use promotional dollars for entry-level bikes as they have in the past.The firm is now estimating lower tariffs and has allowed room for some lower margin as HOG brings back lighter-weight models.The analysts express confidence in management’s ability to steer strategic initiatives, and they estimate a blended multiple of ~12x compared to the ~9x figure previously. This is on account of HDMC earnings now representing a larger portion of HOG FY28E EPS.