Harley-Davidson (HOG), mcap=$5.4bn, price $37.10 vs $40.00

$HOG pitch:
– Harley-Davidson – iconic brand with 70+% market share in the core heavyweight bike market.
– Trades at 8x EPS/FCF as it is perceived as a melting ice cube due to secular demographic headwinds.
– However, the new CEO is reinvigorating growth and profitability by refocusing the business on core geographies and bikes.
– He previously succeded in bringing Puma from the brink of bankruptcy to a 4000% stock return.
– HOG needs to reach $70/share (75% upside) for the incentive package to kick in.
– Margins are already improving vs 2019 and approaching the heydays of pre-GFR Harley.
– Dealer $ and margin profitability in ’21 was a 25+ year high, despite inventories down 70+%.
– The CEO personally purchased $5m of stock.

$HOG valuation:
– Despite a challenging last decade, Harley has continued to deliver impressive/consistent FCF.
– Capacity to continue buybacks and retire 1/3 of shares over the next 4 years.
– With $10 of EPS (vs $5 expected in 2022) at a 10x multiple, would be $100+ stock by 2025.

Exp. gain: 2.5x to $100+/share.

Full HOG write-up (free guest account required):

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