Every day, Wall Street analysts upgrade some stocks, downgrade others, and "initiate coverage" on a few more. But do these analysts even know what they're talking about? Today, we're taking one high-profile Wall Street pick and putting it under the microscope...

Harley-Davidson (NYSE:HOG) stock entered 2017 to mixed reviews. Reporting Q4 2016 earnings back in January, the motorcycle maker announced that its profits had jumped 12% year over year -- but still missed analyst estimates by about 13%.

Sales showed a mirror image. On the one hand, Harley beat estimates for quarterly sales, with Harley moving $1.11 billion worth of product -- 14% better than expected. On the other hand, these sales were still 6% less than Harley reported in the previous year's Q4. So how will Harley-Davidson perform in this year?

According to one analyst, maybe better than you think.

Parked motorcycles in line.

Image source: Getty Images.

1. Longbow upgrades

Bright and early this morning, equity research firm Longbow Research laid out its argument (detailed here on StreetInsider.com) for why it believes that Harley-Davidson is already outperforming expectations for early 2017. Citing "strong reception for the new MY17 models" and resulting "stronger than expected retail sell-through," Longbow removed its underperform rating and upgraded Harley-Davidson stock to neutral.

No specific price target was named, but given the rating, Longbow at least appears to believe there's little risk in owning Harley-Davidson shares here at a price of roughly $62 a share.

2. But why?

Longbow's upgrade hinges on the analyst's strong suspicion that Harley is doing better than planned in the early months of 2017. In January, as you may recall, Harley issued new guidance predicting that it would ship between 66,000 and 71,000 new motorcycles to dealers in Q1.

Longbow notes that if correct, the midpoint of this range would imply about a 17.5% year-over-year decline in motorcycle shipments for Harley. And yet, according to the analyst's own estimates, Harley's shipments in Q1 have in fact been running only 11% to 13% below Q1 2016 levels.

Thus, there's a very real possibility that when Harley next reports earnings (due out April 17), its report will show better-than-expected sales -- beating analyst estimates for a second straight quarter.

3. How'd it do that?

Longbow attributes Harley's (presumed) sales success to two things: First, popular new models of motorcycles being shipped this year, and warmer weather to ride them in. Warmer weather not only gets potential motorcycle buyers thinking of riding, and buying, sooner than usual. It also keeps road free of snow, and makes it easier to get to a dealership. As a result, Longbow calls "warmer than expected weather ... the main driver of sales" in Q1.

And in case you haven't noticed (and despite the recent snowstorm on the East Coast), this year has been trending quite a bit warmer than normal so far. According to National Oceanic and Atmospheric Administration data, average temperatures in the continental United States were 3.5 degrees above the average for the 20th century in January -- and a whopping 7.3 degrees warmer than average in February!

That may be bad news for the polar ice caps, but it could be great news for Harley-Davidson's sales.

The upshot for investors

So what does all this mean for investors?

Currently, Harley-Davidson stock is selling for 15.2 times trailing earnings, which doesn't seem like much. Even adjusted to account for debt attributable to its manufacturing operations, the company's debt-adjusted price-to-earnings ratio is only 16.5, which doesn't seem too awfully expensive for a stock that pays a 2.4% dividend yield, and that is pegged for 12.5% annualized growth over the next five years, according to analysts.

Basically, you're looking paying a 16.5 adjusted P/E for close to a 15% total return at this point -- a total return ratio of 1.1. What's more, if Longbow Research is right about Harley's Q1 2017 sales coming in stronger than expected, and if that strength carries through the full year and beyond, it's entirely possible that earnings growth will be greater than 12.5%. In that case, the total return ratio will also turn lower, and Harley-Davidson stock will turn out to be even cheaper than it looks.

My conclusion: Longbow Research is probably right to re-rate Harley stock and upgrade it to neutral. The stock is not obviously cheap, but it's not obviously overpriced, either -- and if the stars align just right, there's even the possibility that Harley-Davidson stock could be a bargain.

Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.