RBC Downgrades Harley-Davidson, Cautions Operational Estimates Are 'Too High'

In a report published Wednesday, RBC Capital analyst Joseph Spak downgraded the rating on

from Outperform to Sector Perform, while lowering the price target from $66 to $59. The analyst expects near-term demand to remain soft, with flat operational growth for the company into 2016. Given that the stock valuation is not too high and that the company's share buybacks would limit the downside, the analyst believes that long-term investors should be patient with this stock. In addition, with the catalyst from Harley-Davidson's share repurchase programs having passed, the analyst now believes that the consensus operational expectations for 2015/2016 could prove to be too high. "Despite lower 2Q15 shipments (guidance of down 5-10%), 2Q15 dealer inventories seem, at best similar to 1Q15 levels. This isn't too concerning as they weren't that high," Spak stated, adding that there could be risk to the shipment guidance for 2015 or at least "over-inventory" moving into 2016, in the absence of retail sales acceleration. "New product could help the 2H shipment acceleration and prove us wrong but aside from easy comps we don't have a lot of visibility as to what can drive upside to guidance or even consensus," Spak added.