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Can Harley-Davidson's Street 500 and 750 give it enough of an edge to offset the decline in the typical motorcycle rider's purchasing power? Image source: Harley-Davidson.

Harley-Davidson (NYSE:HOG) is still skidding after its third-quarter earnings wipeout that caused it to revise guidance lower and say it wouldn't be able to meet its previously rosy forecast. The big-bike maker's stock slid 14% that day, it's down another 3% or so since, and shares have lost 30% of their value across all of 2015.

As Harley prepares to report its fourth-quarter and full-year earnings in late January, what can investors expect from the motorcycle company? Will it finally gain traction on sales, or will it suffer yet another case of road rash?

Stuck in first gear
The problem for Harley-Davidson can be traced to the changing dynamic of today's motorcycle buyer, who isn't so much the middle-aged white professional dropping $20,000 or more for a big V-twin. Rather, today's bike buyers are trending toward younger, new riders.

According to J.D. Power & Associates, since 2001 the average age of motorcycle owners has risen from 40 years old to 47, while first-time buyers accounted for 22% of all new bike sales in 2001 and has remained flat since. The market research firm concludes, "it is critical for manufacturers to focus on attracting first-time and younger buyers -- primarily those in the Gen X and Y demographics -- in order to ensure continued growth in this market."

Anecdotally, these riders were more attracted to sport bikes than to Harleys, and Harley even flirted with that end of the market for a time, first by purchasing Buell Motorcycle in the late 1990s and then MV Agusta a decade later. It subsequently shut down production on the former and sold the latter.

Hitting the streets
But with sales struggling following the initial growth spurt after the recession, Harley realized it needed more than just cruisers if it wanted to regain momentum, and in late 2013 introduced the Street 500 and 750 models. These runabouts were geared specifically to these new riders and have proven a popular introduction to the brand, with an estimated 70% of Street bikes sold in the first year going to first-time Harley riders. Year to date, these bikes are Harley's only style enjoying year-over-year dealer shipment increases.

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Harley-Davidson's Street bikes have been smoking the competition -- up to a point. It's a lead that may not hold down the road. Image source: Harley-Davidson.

Yet there remains a lot of competition for these riders. Not only from traditional sport bike makers like Honda, Suzuki, and Kawasaki, and even from Erik Buell Racing, which was resurrected as a separate company, but also from Polaris Industries (NYSE:PII), which performed a resurrection of its own by buying the Indian Motorcycle nameplate and introducing the Scout model that was also targeted to this entry-level bike buyer. Now it's introduced an all-new Scout Sixty model that is lower-cost and aimed as a direct competitor to Harley's Streets.

Harley may be down, but it's not out
But let's not forget, Harley-Davidson still owns the motorcycle market. About half of all big bikes sold in the U.S. are Harleys. And even though its market share has slipped in recent periods, Polaris is way behind. Harley generated almost $1.2 billion in sales from motorcycles in the third quarter; Polaris, just $189 million, and that comes from both the Indian and Victory nameplates, as well as its three-wheeled Slingshot.

Still, Harley is slipping. As its revised guidance indicates, it wore its rose-colored glasses too long even though signs indicated early on that it was being too optimistic -- and there's a chance it's still being too exuberant in its shipment forecasts.

The big-bike maker reduced its dealer shipment guidance last quarter from a range of 276,000 to 281,000 motorcycles shipped in 2015 to 265,000 to 270,000 motorcycles, or a 4% drop. But in last year's fourth quarter, Harley got really aggressive with its shipments, boosting the number of bikes it sent to dealer showrooms and just squeaking over the low end of its guidance threshold. While "channel stuffing" is a harsh phrase, with Harley's sales falling as they were last year, there didn't seem to be a reason for it to actually increase the number of bikes it shipped to dealers during one of its historically slow quarters other than to make sure it made that base number.

So that means the downtrend it's been going through could see it miss guidance this year. And considering that the company also cut full-year operating margin estimates to 16%-17% from its prior forecast of 18% -19%, we see that Harley-Davidson's profit picture may not be a pretty one.

A chance to turn the tables
Of course, the bike maker could surprise. Clothing retailers have been complaining that warmer-than-usual weather has thrown off their winter sales game plan, and that could just be a factor that leads to a tick higher in motorcycle sales. But stores are also worried about consumers being overly cautious with their spending, and that mind-set doesn't easily translate into a big-ticket purchase.

Harley has bemoaned the promotional environment other bike makers like Polaris have created, and has tried to withhold discounting its prices to maintain its margins. But it's also giving away free riding lessons at its dealer academies and using Street bikes as a soft-sell tool. Yet until Harley-Davidson shows concrete proof that it really has stopped its slide, there's no reason investors should risk getting road rash by hopping aboard its stock.

Rich Duprey has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Polaris Industries. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.