Harley-Davidson Stock Up 8% Today – Time to Buy HOG Stock?
Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.
The price of Harley-Davidson stock is surging 8% in pre-market stock trading action this morning at $39.5 per share following news about a deal stroked by the United States and the European Commission to suspend the tariffs imposed by the Trump administration on steel and aluminum imports from the old continent.
According to the terms of the agreement, the United States will permit duty-free imports of both metals and the EU will lift the tariffs it had previously imposed on a selected group of US products as a retaliatory measure against the Trump-era arrangement. Harley-Davidson’s motorbikes are among the products that will be benefitted from this decision.
Can this pre-market uptick lead to a full-blown reversal of Harley-Davidson’s latest downtrend? In the following article, I’ll be taking a closer look at the price action and fundamentals of HOG stock to outline plausible scenarios for the future.
67% of all retail investor accounts lose money when trading CFDs with this provider.
Harley-Davidson Stock – Technical Analysis
Harley-Davidson stock has been in a serious downtrend since it hit its 52-week high of $52.06 per share back in May this year as supply-chain related concerns have been affecting the company’s ability to live up to analysts’ forecasts for the first semester of the year.
However, the company managed to report better-than-expected revenues and earnings during the third quarter of the year despite this challenging environment and this led to a break of the falling wedge formation highlighted in the chart.
News about this US-EU deal are further contributing to reversing the downtrend along with these positive quarterly results.
Trading volumes back on 27 October, the day on which the report came out, exceeded the 10-day average by nearly five times. However, there was some heavy selling during the session as the stock settled 5.4% below its intraday high of $37.8 per share.
Momentum indicators remain a bit stalled but they should start to tick higher if today’s pre-market action spills over to the live session.
Moving forward, it would be positive to see the stock rising above its 200-day moving average, which currently stands at $41 per share. This would favor a mid-term bullish outlook for HOG stock on the back of the two above-mentioned positive catalysts.
Harley-Davidson Stock – Fundamental Analysis
In regards to the US-EU tariff deal, Harley-Davidson’s Chief Executive Jochen Zeitz stated: “Today’s news is a big win for Harley-Davidson and our customers, employees and dealers in Europe”.
He added: “This is an important course correction in U.S.-EU trade relations, that will allow us to further Harley-Davidson’s position as the most desirable motorcycle brand in the world”.
The impact of the EU tariffs on Harley’s financials was mostly reflected by lower profit margins in the region. According to data from Statista, the EMEA region, which includes Europe, accounted for nearly 20% of the firm’s sales in units.
The company has cited tariffs as one of the factors depressing its gross margins since the US-EU trade conflict started back in 2018 and has estimated a 2.5% impact on its top-line profitability.
Therefore, the resolution of this conflict should lead to a material improvement in the firm’s operating margins in the next few quarters to around 8.5% to 10.5% – up from the 6% to 8% guidance provided by the management in its Q3 2021 earnings report.
Excluding today’s uptick, the forward P/E ratio for HOG stock stood at 10x – a fairly depressed ratio that is possibly pricing the negative impact of the ongoing supply-chain crisis.
Meanwhile, this is a good start for the management’s Rewire initiative launched back in July 2020 that involves a full-blown overhaul of Harley’s business.
All things considered, the short-term and mid-term outlook for the stock is bullish amid the impact that the positive catalysts cited above could have on the market’s appraisal of the fair value of Harley-Davidson stock.
Buy HOG at eToro with 0% Commission Now!
