Skip to Content
US Videos

Harley Expands Outreach, Bikes to Attract Customers

We have adjusted our fair value estimate for the wide-moat motorcycle manufacturer.


Jaime M. Katz: We recently lowered our fair value on wide-moat Harley-Davidson to $34 from $44 per share. We think there are two key factors that are set to impact the company’s prospects ahead. First, we expect demographics to remain a significant headwind for the domestic heavyweight business, as outlook for the size of the historic core Harley consumer remains unfavorable over the next 40 years, a key tenet in our updated negative moat trend rating. For perspective, the census forecasts the total white population between 35-64 years of age to decline by 10 million persons, whereas the entire African-American and Asian population of the same age, representing Harley's outreach customers, is set to rise by 6 million new people. In order to cover the gap from those consumers lost from the core cohort, outreach penetration would have to be significantly higher than for the core, something we think is unlikely.

Second, with Harley moving into new categories, we have now explicitly incorporated updated assumptions that include entry into middleweight and small displacement bikes in 2020, efforts we believe the company has undertaken to combat its domestic demographic headwinds. The largest decline in our fair value stems from a lower gross margin and average selling prices associated with new models, partially offset by volume increases and SG&A leverage. For an idea of magnitude, we now have pricing falling by 1% on average, versus a 1% increase prior and gross margins that stabilizes around 29% in 2028 (from 34% prior), as volumes ratchet up with new category bikes ramping to nearly 30% of the shipment mix in 2028 from 6% in 2020, helping offset domestic heavyweight declines. These efforts abroad, however, fail to convince us that the brand intangible asset domestically is not eroding.

Jaime M. Katz does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.