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"We see no clear catalyst for when HOG's challenges might subside. The competition continues to heat up, particularly as the Japanese OEMs continue to discount and Polaris (Indian/Victory) gets more aggressive," analyst Felicia Hendrix wrote in a note.
"In response to the favorable financing rates offered by the competition, HOG has once again engaged in aggressive financing via HDFS. All this discounting conditions consumer purchase patterns and leads to higher used bike inventories once the discounting is removed," Hendrix continued.
The analyst was also surprised by the favorable stock movement, despite the company cut its shipment forecast for the fifth time in two years.
Last week, the company reported upside to EPS due to a gain at HDFS and a lower tax rate. But, the company slashed shipment outlook, hurt by a fall in domestic demand, more discounting from global competitors and global macro uncertainties.
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Despite this, shares closed 0.9 percent higher post-earnings on Thursday (S&P500 + 0.2 percent) and gained an additional 3.7 percent the next day (S&P up 0.2 percent); intraday Friday, shares were up as much at 11 percent.
Barclays doesn't believe the worst is behind Harley Davidson, nor is the outlook conservative enough to bring upside to the company.
"Our 2H16 estimates, which are in line with guidance, imply more attractive industry growth forecasts than 1H16," Hendrix noted.
"Further, the company is currently managing for US retail inventories to be flat y/y. While more conservative than prior forecasts for inventory growth, we believe it would be more prudent to manage US retail inventories down y/y especially given the heating up in competition," the analyst added.
That said, Hendrix maintained the price target of $45 on the stock; the full-year EPS estimate is at $3.82.
At time of writing, shares of Harley Davidson were down 1.76 percent at $51.99.
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New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.