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Jefferies upgrades Harley-Davidson to hold as shares reach $39 target By

Jefferies upgrades Harley-Davidson to hold as shares reach $39 target By

© Reuters Jefferies moves Harley-Davidson (HOG) to Hold as shares hit $39 target

By Michael Elkin

Jefferies upgraded Harley-Davidson, Inc. (NYSE:) to a Hold rating (from Underperform) as the motorcycle maker’s stock hits its price target of $39.

Analysts say they see a more balanced risk/reward ratio for the company. However, Jefferies’ view on fundamentals is unchanged as they remain cautious on stabilizing retail demand amid fragile macro and HDFS risks.

The company expects flat to slightly higher retail units in 2023 as inventory availability improves. From a pace perspective, the declines of -5 to 10% in 1Q should turn positive in 2Q-3Q. Jefferies sees significant upside risk from macroeconomic pressure, affordability and competition from used products.

The analysts wrote in a note: “To see upside from current levels, we believe investors will need to see progress towards the projected retail inflection (we estimate. % now expected in 1Q). Additionally, additional confidence in the banking sector (resulting largely from government intervention) and slowing rate hikes would also be positive. Earnings have been trending positive from a stock catalyst perspective, with positive feedback over the last 5 quarters (averaging +7%). On the other hand, bears expecting a gradual decline from here play for persistence/worsening retail trends, overshooting inventory build, intensifying promotions and the significant drop in HDFS projections (’23 EBIT guided -20-25% y/y). We believe our downside case ($21 PT) is unlikely to materialize before more meaningful progress through the retail season (barring a major macro event).

HOG shares are down 1.31% in Wednesday afternoon trade.

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