Morgan Stanley: Harley-Davidson Has Better Odds In SUVs Than Electric Bikes

Amid eroding motorcycle demand, Harley-Davidson Inc HOG’s embracing the electric future overturning the auto industry. But Morgan Stanley thinks the quiet, eco-friendly vision just doesn’t fit the chopper life.

“Are we the only ones who really struggle with the concept of all-electric … silent Harley-Davidson motorcycles?” the firm's analysts said in a Wednesday note.

The Analyst 

Adam Jonas maintained an Overweight rating on Harley-Davidson with a $50 price target.

The Thesis

As Morgan Stanley sees it, Harley-Davidson can either radically transform its culture to fit the millennial consumer, or it can marginally adapt to trends without forsaking its hardcore persona.

“The former takes on elevated execution risk,” Jonas said. “We see the latter option, while less ambitious, as having a greater likelihood of creating lasting value for shareholders.”

By the analyst's assessment, the domestic auto industry has room for another SUV or truck brand — and Harley-Davidson authentically fits the mold. While Morgan Stanley doesn't expect the bike manufacturer to shift resources to four-wheel vehicles, they consider the brand a potentially attractive asset for an established or emerging automaker.

Ford Motor Company F, in particular, may take interest, Jonas said. Ford has developed “Harley-Davidson” trim packages for its F-150 pickups and partnered with the motorcycle maker on its Bronco line.

The analysts see little that’s unnatural in the possible shift, especially considering the alternatives.

“In our opinion, even a Harley-Davidson move to electric four-wheel vehicles (including SUVs) could conceivably be an easier leap for the brand than the move to e-bikes." 

Price Action

Harley-Davidson shares were down 0.74 percent at $36.34 at the time of publication Wednesday. 

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