Harley-Davidson Inc. shares rose Monday after two Citi analysts increased their price target on the motorcycle maker's stock because of rising sales and new products.
THE SPARK: Analysts Gregory Badishkanian and Alvin Concepcion reiterated their "Buy" rating on the stock and raised their price target to $72 from $64.
The analysts said that the company's sales are accelerating so far this quarter and they expect new product launches in August will boost sales over the next few quarters.
THE BIG PICTURE: Harley-Davidson was hit hard by the recession as consumers no longer had the cash or willingness to spend big on a bike. The company's shipments fell sharply and it laid off hundreds of workers.
In 2009, the company lost $55 million and a new CEO, Keith Wandell, was brought in from the outside to help turn things around.
Harley subsequently improved its production efficiency, renegotiated some union contracts and got rid of some secondary brands to focus on selling its bigger, premium-priced motorcycles. The moves paid off and the economy improved, which helped send the company's profitability and stock price back up.
THE ANALYSIS: The analysts said in a research note that they see Harley as a "high conviction long idea". As consumer confidence increases and buyers become more comfortable with the economy, the market for big-ticket leisure items — like a Harley — is improving as well.
SHARE ACTION: Shares increased 71 cents to $62.68 by early afternoon Monday, just a nose ahead of a broader market uptick. The company's stock bottomed out in 2009 near $10 but its stock price has been climbing since then. It is now trading at pre-recession levels.
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