Is Harley-Davidson Doomed?

• Report this Comment On December 18, 2009, at 10:55 PM, Epyx wrote:

  Really sales are down in the forth QTR of a "just barely" revived economy? Wow, big surprise motorcycle sales are down in winter to a lower point than the summer. Thanks Goldman. Great analysis. Luxury items will follow the economy but also recover slower.

  Motorycyles sell better in spring and summer. Start to worry if 2nd Qtr '10 is off, not 4th and 1st.

• Report this Comment On December 19, 2009, at 12:25 AM, Fool wrote:

  The GS recommendation was based on research - calling around probably to various inside contacts to get an idea on sales figures. This is what you do when forming an opinion. The author if this article dreams up some unrealistic scenario where harley owners trade their cheap, defective bikes for more expensive ones. Not in a recession - you keep what you got. You buy your bike when you get your job back and you are back to full time employment Typical harley owners are the ones living in homes with no equity, their construction jobs have dried up or they are doing like what car owners do - they repair rather than replace during this recession. Well sales crater? Maybe or maybe not - where is the catalyst - we need jobs first. So this stock is going nowhere but probably down for the next year. Maybe a good stock to consider a year from now,

• Report this Comment On December 19, 2009, at 12:58 AM, truthisntstupid wrote:

  How much of their sales numbers the last couple years came from subprime loans and channel stuffing? I think they'll come back but how will they ever make the money they did before? The securitization market, will it come back as it was before? And they have union workers with sticky wages, but now they'll have to pay them those high wages while HDFS struggles to regain its footing in the wake of a much weaker securitization market and paying 15% on that loan from Warren Buffet. Also, could be that dealers will balk at any renewed attempts at channel-stuffing.

• Report this Comment On December 19, 2009, at 1:52 AM, dlcapo wrote:

  I think the notion that Harley riders are working sub par construction jobs and living in no equity homes is a vision out of the past. Where were you when the yuppie generation hit the Harley show room?

  Average Harley owners have college educations and work high tech jobs these days. It's about $20,000.00 to mount up last time I looked. Chainsaw and a pickup truck won't get it done anymore.

• Report this Comment On December 19, 2009, at 2:06 AM, truthisntstupid wrote:

  Yep. And they were selling those $20,000 bikes to people that couldn't afford them. HDFS got buried in subprime mortgage loans and when the securitization market went to hell they were stuck with the bad loans they made and had to borrow billions of $$ from Warren Buffet @ 15% interest. Their credit was downgraded for a reason.

• Report this Comment On December 19, 2009, at 2:53 AM, buynholdisdead wrote:

  Dicapo is right, Harley riders now are a bunch of yuppies and the average age is 53 years old. Most of them own their homes or at least have high incomes. I see them every weekend putting on their leathers and trying to be bikers. Most of them dont know anything about bikes and they think Harleys are the best of bikes. Now that they have this recall it might just make them think twice. Especially when you can buy a japanese bike for half the price and get a better bike. I think Harley's mystique is dying because most of the Vietnam era bikers are starting to pass by. I believe in the years to come they are either going to have to come down in their prices or they are going to go. I just bought a bike and I looked at the Harley's but for the price I decided to go with a Kawasaki.

• Report this Comment On December 19, 2009, at 9:51 PM, Everydayisgood wrote:

  Harley has a top-notch international brand which might be further developed long-term in new markets such as India or China. As noted in other posts, however, the average age of its loyal following in the U.S. is 53 (and seemingly rising). I do not see a basis for significant domestic growth going forward.

  As Harley management has shown effective marketing expertise historically, perhaps they can eventually overcome their current contraction and shrinking revenue to stabilize and show some degree of domestic growth. That said, I think the short term picture looks quite dismal.

  I take note that their cash to debt ratio has been damaged in their effort to reconstruct their business plan and the situation will probably erode further as they work their way out of their hog finance problems and create new marketing initiatives.

  The "upsell" opportunity from the recall might sound good, but is just something that sounds good. It's only wishful thinking in this environment, no matter how witty or pithy various Fool comments may be. I frequently drive past an upscale, state of the art Harley dealership four miles from me in a relatively affluent area, and the employees look hunkered down and play darts a lot as the place looks more like a mauseleum or museum than a place of business. I'm afraid there is more hurt ahead for the foreseeable future.

  I am stunned that the stock is trading in the upper 20s, and personally think that Goldman's target of 23 is very kind. For now and for at least the next 12 months, I can't see that the stock makes sense above 15.

• Report this Comment On December 19, 2009, at 11:37 PM, EekARat wrote:

  Harley has good brand and they had opportunity in China and India. But Harley's marketing department is hurting their sales in China, India and middle East with they latest campaign based on US veterans and war achievements; not exactly positive image building in these countries.

  HOG will have hard times ahead, and if they hope to get sales boost in China and India, they need to renew they marketing approach. Only very rich can buy Harley here in China.

  HOG stock is not interesting in this price level but perhaps MFO group could play with it.

• Report this Comment On December 19, 2009, at 11:38 PM, topsecret09 wrote:

  Didn't like the stock when It was at $17,like It much less at $26.... Too many good growing companies to choose from to bother with HOG...... TS

• Report this Comment On December 20, 2009, at 3:35 AM, baldheadeddork wrote:

  I'm a motorcyclist with a couple decades experience and I've been watching HOG closely since the beginning of the Vaughn Beals era in the early 80's.

  Harley is overdue for a major downturn in sales. They saved the company by creating the baby-boomer "born again biker" market in the 80's and 90's. The downside of that has always been is that a day would come when their market would age out of buying new motorcycles, and that day is clearly here. The Harley brand is iconic for people over 40 but it's invisible for men in their 20's and 30's. People in that age group who have any feeling about Harley's associate them with old guys and Viagra commercials. Not good for a brand that wants to be the definition of rebellion and cool.

  But, Harley is an incredibly well run company. They managed their success better than any company I can think of - they didn't go nuts with expansion or acquisitions and best of all, they never believed that it would last forever. They've been planning for this for a long, long time.

  Harley knows that it has to ride out this downturn, remain focused on their core image and brand, and let the market rediscover how cool they are a decade or so from now. It's not what an owner of HOG wants to hear, but to remake their iconic brand into something else would risk disaster. That's what Levi's did when non-designer blue jeans fell out of fashion and they ended up destroying their brand.

  I wouldn't buy HOG until their sales finds bottom and I think they have a ways to go before they get there. But this company will be around fifty years from now, and it will become a big thing again.

• Report this Comment On December 20, 2009, at 12:39 PM, seanrick wrote:

  Rich, i see you still havent purchased any hog shares

  if you had to purchased before you last call you would be up -6% and the upsell idea great idea I can see the saleman now " this bike is a piece of crap let's upgrade

  i give you 1000 for this piece of junk and you can fiance

  a new one let's say 15,000. i think people are smarter than you might think

  but there a sucker borned every day

• Report this Comment On December 20, 2009, at 4:37 PM, rogerlig wrote:

  With unemployment likely to stick at 10%, and probably higer in the sub-prime crowd that has historically been HOG's "heaven", how can this most discretionary purchase on Earth, possibly NOT tank?

  Even Buffet gets them wrong sometimes. Didn't he buy into GE at, what, $22?

• Report this Comment On December 20, 2009, at 5:10 PM, TMFDitty wrote:

  Your memory is good, rogerlig.

  Mr. Buffett bought into GE in the low 20s. However, he bought preferred shares. These give him the option of converting into common if it becomes profitable to do so -- if the share price goes up. If it doesn't, he'll just collect his (I believe) 10% dividends on the shares and wait.

  http://www.fool.com/investing/general/2009/08/20/why-is-buff...

  Fool on!

  TMFDitty

• Report this Comment On December 20, 2009, at 9:16 PM, UJMsRule wrote:

  Southpark got it right with their recent episode, at least as it pertains to the riders.

  If you've not seen the episode, give it a gander -

  http://www.southparkstudios.com/episodes/251889/?autoplay=fa...

  The Harley fad is over, should of ended long ago IMO.

  Poor decisions on who was financed will be biting them hard soon.

  And the motorcycles are overpriced and underperforming, something that was all to obvious to many, is now clearing up for more than a few.

  How Buell was handled made a mockery of the management in the eyes of many, too many mistakes, too many false assumptions -

• Report this Comment On December 22, 2009, at 12:23 PM, PSU69 wrote:

  I have been riding on 2 wheels since 1971. KTM was one of my clients. I opened an office in Tokyo, one in Munich, and one in England. Yes, HOG rode the demographic of boomers. True, HOG lost share to more reliable bikes (personally, I have been on BMW the last two buys). My pal is in an exec engrg role at HD. I worked in Moto and attended the Moto GP in Barcelona this year. I worked directly with HRC (Honda Racing) in Japan as a supplier. I share this just to help the readers see that I have a multi-decade POV and an imbedded in the board room POV with several motorcycle builders. I also see the production data for all brands from the MIC (industry organization). I also supplied all of the brakes to HD until they started adding Japanese brakes and Italian brakes to certain models.

  One point no one mentioned yet in this thread is the HD brand used bike market has dragged down value and many are upside down on their loans so a trade in is out of the question. This reservoir of depreciated used bikes has flooded the market. This fact is adding to the slow new bike sales reality.

  HD leadership was very slow to bank the furnaces as the recession accelerated. They added to their debt problem by allowing FGI and WIP to pile up all thru the system.

  In CAPS, I shorted HD. In reallity, I shorted HD. It will get far worse for HD. Like GM, and their hundreds of CLOSED dealerships, HD may not make it back to the glory days.

  I earned a BSME and an MBA. I am a rider on 2 wheels for 39 years. I have never purschsed a HOG. I prefer high speed reliable bikes that have both great power and great handling. Noise and vibration have never motivated me to write a check for the sake of "image."

• Report this Comment On December 22, 2009, at 1:11 PM, Turfscape wrote:

  Always fun to read the uninformed comments..."Harley is for Baby Boomers"..."Dying Customers"..."Too Expensive"..."People Want Sportbikes"..."It's a Fad"...

  Here's some facts:

  HOG continues to be profitable, they have not had an operating loss throughout this downturn, nor the last one, nor the one before that.

  HOG has continued to reduce operating costs...improving margin on each sale.

  HOG recently dumped non-performing subsidiaries Buell and MV Agusta, both of which were drains on revenue. This will increase profitability for both the company and dealers.

  HOG has increased female ridership to now make up 12% of vehicle sales

  Want a taste of "upsell"? Get off the internet and spend some time in a dealership. You might go in for an oil filter, but you're walking out with new mirrors, a timer cover, oil filter and a pair of shades. It's not some theory, I watch it happen.

  HOG has taken great advantage of the downturn to get some things corrected and is now poised to rebound very nicely. Say what you want about HOG riders, but the company has solid management in place now. They're making the tough decisions and the right moves that will leave HOG in a stronger place in the global market, not just the U.S. Turnaround don't happen overnight, but they are on a two to three year track back to peak performance.

  Target: $32

  Disclosure: Long HOG

• Report this Comment On December 22, 2009, at 6:35 PM, daveandrae wrote:

  I am a Harley Davidson shareholder. I am also a H.O.G. member. I have also taken the Harley Davidson Police Motor school. I also own two Harley Davidson motorcycles. a 1998 fatboy, and a 2007 Road King Classic.

  Thus, you could say I know more than most people, when it comes to Harley Davidson. On the positive side, they make a GREAT motorcycle. I've put more than 40,000 miles on my 2007 and have not had ANY problems.

  The 2010's are even better. I know a lot people that are saving up for one. I also know A LOT of Harley Davidson riders. To suggest that they are 50 something grey hairs rubbing two pennies together is foolish. Most of us are in our early 40's, extremely successful, and own our bikes outright.

  if you look back at the 1990, and 2001 recessions, the subsequent recoveries were so strong, that Harley's stock price nearly doubled in 1991, and 2003. The last thing I would do is short this stock going into 2010. You are truly speculating with your money if you are betting against this country.

  With all that said, I have no idea what is going to happen. The one thing I have learned over the years is that if you are truly LONG a stock, then you are willing to ride it zero.

  Thomas Edmonds

• Report this Comment On December 24, 2009, at 11:27 AM, aputtman wrote:

  Harley's death is again (think 1970's) greatly exaggerated.

• Report this Comment On December 24, 2009, at 1:46 PM, dave22q wrote:

  I doubt if anyone serious at Goodman is buying puts on Harley. Forecasts of doom need to wait untill we see the results of the summer season with the economy turning.

  Chances are better for a hostile foreign takeover attempt than bankrupcy in the next year but not smart to bet on either one. There are too many better places to invest.

• Report this Comment On December 25, 2009, at 4:28 AM, ET69 wrote:

  I'm with Turfscape. Harley is not just any old company. Its an existential love affair. I notice that those who dis Harley bought other rigs...your choice BUT you will never have the 'cool factor' a HOG has. As for those who compare Harleys to BMW's or Kawasakis--that's like comparing apples and oranges- totally different experience. I've had a Honda and a Suzuki when I was young. Had a Triumph and I liked it a lot...but a Harley AHH...man the others are like a cheap hand job compared to the real thing. If you don't get it then you REALLY don't get it!

• Report this Comment On December 25, 2009, at 3:32 PM, tommzz wrote:

  Harley Davidson is an American Institution. I'm not suggesting that it is on sale right now but investing still should be about the long haul. As for the cheapskates out there that are bragging that they bought a Japanese bike for less money...so what! If you bought a cruiser or bagger and its not a HD, its a knock off. I'm sorry, but it's really that simple. If you are fine with then...great! But there are a great many of us that are are willing to pay a little more for the "original". Myself and my buddy, both in our 30s, just bought ours. OBTW HD did have issues in the past with reliability but those days are long gone. Despite the recall, late model HD's are some of the most reliable bikes on the road. Go Harley, go LONG!

• Report this Comment On December 26, 2009, at 9:16 AM, UbuGray wrote:

  The article is about HD surviving the times and we've got HOG members justifying their purchases. Way to go off-track folks. Harley will weather the storm, they do have the talent. But, the days of large numbers of buyers dropping 20K without a second thought are behind us. There will be those that think 20K will buy them coolness, but the majority will question the value that coolness will put in their garage. If you're buying a ride, then coolness isn't the buying decision, there's a lot more decisions to make. Harley needs to step back and rethink their philosophy to move ahead. They certainly could just cut back production and call it good, but sooner or later stockholders will get sick of that story and use their voting power. The reason HD stock hit the 40s was due to baby boomers with disposable cash. They are now past that stage in their lives and holding onto the cash for retirement now that investments are a lot lower than a year ago. If Harley wants their market share to grow, they need to think about why Honda, Star, and others are doing well - quality and price makes for value. People are wising up to this.

• Report this Comment On December 26, 2009, at 11:27 PM, solarfool314 wrote:

  It's not whether Harleys are cool, it's whether it's a good place to invest money.

  HD has a loyal fan base and always will but I think they are making a mistake to focus completely on big cruiser bikes to the exclusion of everything else. They don't build a beginners bike, a dirt bike, dual sport or crotch rocket.

  A lot of kids start their riding experience on a dirt bike and have developed brand loyalties long before they could ride on the street. Some of those kids will have a Harley in their futures but many will ride for years and never want one.

  A cyclist for 45 years, I recently rode a friends late model sportster. While I thought it had a sweet motor the bike was not suitable for the types of riding I like to do. HD doesn't make a bike that is really.

  If you want to own a piece of an American institution by all means buy some HOG stock. If you are interested in return on your investment there are other companies more likely to reward your risk.

• Report this Comment On December 31, 2009, at 9:53 AM, daveandrae wrote:

  This company has survived the great depression, two world wars, and more than 14 recessions since WWII. To bet against it just as unemployment is starting to fall is foolish.

  Just foolish.

  With dividends reinvested, this stock is up 53.36% year to date, and more than 18% annualized since it's 1986 ipo, trouncing the s&p 500. In 1933, a Glide sold for 320 bucks. Today, a glide sells for more than 20k. Thus, this company has tremendous pricing power over the long term.

  All Harley needs is a 4% GDP economy to get it's net margins up to 10%. That would equate into 1.70 in earnings power for 2010, assuming the company can generate 4 billion in sales. Slap a modest p/e of 15 on 1.70, and there is very little downside at present market prices.

  15 x's 1.70 = 25.53 stock price.

  There is no such thing as a "bad" market, or a "good" market. The is only one, supreme EFFICIENT market, and it does a wonderful job when it comes to setting market prices.

  If one would bother to do their homework, they would see that the s&p 500 is also trading at approximately 15 times 2010 earnings. It remains to be seen whether or not there will be any multiple expansion.

  Thomas Edmonds

• Report this Comment On January 02, 2010, at 10:16 PM, Everydayisgood wrote:

  Foolish me.

  I believe that the previous poster probably does his "homework" in a diligent fashion, but confuses historical strength with current weakness and is proceeding on faith when he postulates "tremendous pricing power over the long term."

  Harley is very likely to "survive," but is it way overpriced relative to current fundamentals?

  I respectfully submit that the rest of us pilgrims should be very wary of this damaged icon at today's market price. The U.S. market is eroding for the foreseeable future and the company has been forced to take on significant debt ... and expansion into India and China, although promising in the long run, will take several years of development.

  I see HOG fairly valued at 15 in today's market.

  I agree fully with a financial blogger's post I ran across recently, which states:

  Overvalued Stocks: Don’t Touch These Bloated Investments With a 10-Foot Pole

  by Marc Lichtenfeld,

  Harley Davidson (NYSE: HOG)

  In an economy where everyone is worried about the job market, it’s no surprise that big ticket, discretionary items like a new motorcycle are low on the priority list.

  Harley Davidson’s results prove this. Revenue is expected to fall by 22% in 2009 and shrink another 1.3% in 2010, according to estimates. The stock currently trades at 27 times earnings, 20 times forward earnings and 137 times cash flow. The company is also loaded with debt. Right now, its bikes represent better value than its shares.

• Report this Comment On January 05, 2010, at 6:48 PM, rdlestraveled wrote:

  interesting reading and was fascinated from the opinions of the pros here. then we have the Jethro, you know the narrow minded harley lovers that cant think of anything but their ride or rapping themselves in the american flag. aren't we Americans all patriots with what ever we buy foreign or domestic?

• Report this Comment On January 06, 2010, at 11:26 AM, daveandrae wrote:

  How many miles do you think Marc Lichenfield rode in 2009?

  My guess is ZERO.

  How many H.O.G. meetings do you think he went to in 2009? How many dealerships do you think he's been in? You think he's ever been to Sturgis, Bikeweek, or the MotorGP? Do you honestly think he's ever done one, single, group ride?

  Could Marc explain what it feels like to ride the Dragon, the Devil's Tower, A1A, or the Needles highway?

  If I laid out a Police level obstacle course and told Marc to ride through it without dropping his motor, do you think he could do it?

  If you think the answers to all of these questions is a resounding NO, then why do you care what this person thinks about the Harley Davidson Motor Company?

  This company earned, on average, 2.26 a share from 1998-2008. To suggest that it is currently trading at 27 times 2010 earnings is laughable. The person that thinks such things does not do homework. That person believes everything that they READ as if it were the freaking gospel!

  This is the fundamental problem with security analysis. People invest far too little in stocks they throughly understand, and far too much in stocks in which they know nothing at ALL!

  Thomas Edmonds

• Report this Comment On January 15, 2010, at 8:17 PM, Fool wrote:

  These are the same genius bankers that have nearly bankrupted this country. Now they are collecting huge bonuses for doing so much damage to this country and nothing is being done about it. If I were you, I wouldn't take one ounce of advice from these idiots. They drive BMW's and Mercedes and couldn't find the oil dipstick if they had to.

  Wake up. Harley-Davidson will survive as they have done for the last 107 years. Anybody that has ever put two fists into the wind on a Harley-Davidson knows the real truth.

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