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Harley-Davidson Stock Is Upgraded as Valuation Is 'Too Low'Harley-Davidson Stock Is Upgraded as Valuation Is 'Too Low'Vanjani, Karishma.Barron's (Online); New York Wall Street is pricing too much negativity into shares of Harley-Davidson, according to analysts at Morgan Stanley. They turned a bit more bullish on the stock, upgrading it to Equal Weight from Underweight. "We see a much more positive risk-reward," said Billy Kovanis, an analyst at Morgan Stanley. The stock has underperformed the S&P 500 by approximately 30% in the last nine months, according to Kovanis. Harley-Davidson (ticker: HOG) closed at $34.52 on Monday, trading at 8.8 times its 2022 earnings per share consensus of $3.92. This is a roughly 30% discount to its historical average of 12.4 times, Kovanis said. "Despite some potential challenges that lie ahead for Harley, we think this valuation is simply too low," Kovanis said, "especially as we forecast Harley to still grow revenues in 2022 and 2023 by 8% and 3%, respectively." Morgan Stanley forecast earnings of $4.05 a share by 2023, up from $3.80 in 2021. Kovanis also said he thinks the market appears to be giving little to no value to its recent separation of LiveWire . Harley-Davidson will own about 74% of the electric-vehicle brand after it goes public through a $1.77 billion SPAC merger. Harley-Davidson has found a way to crystallize value for the business and is still able to share in the upside of LiveWire via its stake, Kovanis noted. Livewire was introduced as a stand-alone model in 2019 . The analyst raised his price target on Harley-Davidson to $40 a share from $39; he values the core Harley-Davidson business at $36, and LiveWire at $4. Harley-Davidson likely will provide more details around LiveWire projections and its go-to-market strategy in its fourth-quarter earnings on Feb. 8, according to Kovanis. The LiveWire deal is expected to be completed in the later first half of 2022. Shares of Harley-Davidson were rising Tuesday by 2.4% to $35.41. The motorcycle manufacturer has fallen 6% year to date. |
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