Barclays: Harley-Davidson Market Reaction 'Wasn't Supposed To Be This Bad'

In a report published Wednesday, analysts at Barclays maintain their Equal-Weight rating on Harley-Davidson, Inc. (NYSE: HOG). The price target has been lowered from $70 to $64. Investor reaction to the company's 1Q15 results was more negative than expected."Expectations heading into the quarter were already low given the well-known impact of weather on domestic retail registrations. Given the company's strategy to ship what it sells, chances for a slight unit growth reduction was likely even in the back of some investor's minds," the analysts said.However, investor concern was sparked with the company's focus on the increasingly aggressive competitive discounting in the United States. In earlier statements, Harley Davidson had commented on the discounting, stating that while the management was keeping an eye on competitive discounting, the motorbikes in the segment did not pose much of a threat. Therefore, the increased management concern regarding the discounted was unexpected by the investors. "Further troubling investors is the company's now back half loaded quarterly guidance, which implies 2H y/y unit growth of 15.9% (vs. -4.5% in 1H)… many investors remain frustrated and wonder if the stock at these levels (13.0x 2016E EPS) is a value trap or an opportunity," the analysts stated.Barclays believes, however, that Harley Davidson's risk/reward profile is favorable at present, and that positive retail registration data over a few months could offer upside to the stock. The EPS estimates for 2015 and 2016 have been raised to $3.99 and $4.30, respectively, based on expectations of unit shipment growth of over 2 percent and 4 percent in 2015 and 2016, respectively.