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Why Harley-Davidson Stock Popped 6% Today

By Rich Smith – Updated May 5, 2020 at 12:36PM

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The motorcycle builder has a plan to restart growth -- and this analyst likes it.

What happened

One week after Harley-Davidson's (HOG 0.76%) Q1 2020 earnings report sent the stock soaring 15% in a day, shares of the motorcycle maker are accelerating once again on the back of an analyst upgrade based largely on that earnings report.

As of 12:15 p.m. EDT on Tuesday, Harley-Davidson stock was up 6.2%.

Upward-pointing arrow rising over 2020

Image source: Getty Images.

So what

This morning, equity research firm Argus announced it is upgrading Harley stock from hold to buy, with a $30 price target, StreetInsider.com reported.

Referring to the company's new Rewire strategic plan announced with the Q1 earnings last week, Argus says that Harley has a solid recovery ahead of it as the economy restarts. Harley has promised to reduce complexity and increase the speed of decision making to reach new riders and invest in the products and markets that offer the most profit and potential. The aim, management said, is to be in position to take advantage once the economy resumes growing.  

Argus also likes Harley's efforts to reduce the impact of the pandemic through salary cuts, hiring freezes, and adjustments in its product launches.

Now what

Harley-Davidson remained profitable in Q1, and currently trades for 9.4 times trailing earnings and 7.1 times forward earnings. Argus believes the company could grow faster than expected next year, to the extent that its valuation at current prices is actually only 6 times Argus' estimate of what the company will earn next year (about $3.40 per share).

This valuation, Argus says, "provides risk-tolerant investors with a favorable entry point" as Harley-Davidson stock slowly climbs back toward $30 a share.

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

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Stocks Mentioned

Harley-Davidson, Inc. Stock Quote
Harley-Davidson, Inc.
HOG
$37.38 (0.76%) $0.28

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