Harley Davidson Stock
How Harley Stock Could Roar Back
By Harley-Davidson shares have taken a bumpy road downward, partly due to subprime loans. But investors who buy now could soon find themselves in Hog heaven.
It turns out that loans made to iffy borrowers aren’t just taking down housing stocks.
Since late February, troubles with dodgy loans have contributed to a painful slide of Harley-Davidson shares, taking the stock down more than 15%.
Here’s the problem: The iconic American motorcycle company has a financing arm that helps fans buy their pricey Hogs. Enthusiasts often pay $25,000 or more for custom bikes.
Harley-Davidson (HOG, news, msgs) finances about half the motorcycles it sells. Now, many of those customers are having a hard time keeping up with payments — and the company is getting less for the Hogs it repossesses because used bike prices have been weakening.
The problems may only get worse. As lending standards tighten because of concerns about low-end borrowers, sales growth could suffer. Somewhere between 10% and 15% of bikes sold last year were rolled out of the showrooms by subprime borrowers. Already, the company has taken 2007 earnings growth guidance down to 4%-6% — a hefty cut from the prior range of 11% to 17%.
This one-two punch has Harley-Davidson investors racing to get out of the stock. Since late February, they’ve driven it down to $59 from above $70.
The road to Hog heaven
At some point, though, enough will be enough, and I think we are almost there. To be sure, traders could push Harley-Davidson stock down even more on worries that the company may announce bad news with its April 19 first-quarter earnings report. Read more…
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