Harley Davidson Expects Increase In Repossessions
A thin ray of sunshine lit the gloom surrounding Harley-Davidson on Thursday, as Wedbush Securities noted that prices of used Harleys have ticked up. The motorcycle maker has suffered a revenue slump as its high-price bikes have gotten caught in the Trump administration’s trade war. They also compete for sales against all the used Harleys out there—so any price uptick in the used market is a good sign.
Surveying used bike prices, analyst James Hardiman said that year-old hogs (as the brand is affectionately known) currently sell for a 7% discount, on average. That’s considerably better than the 14% discount that similarly-aged models sold for last year, and the narrowest discount since the happier days of 2013.
Still, the Wedbush analyst will wait and see before he revises his Neutral rating on Harley-Davidson stock (ticker: HOG) or his $35 price target. The shares were roughly flat in Thursday morning trading, at $35.04.
Reinforcing Hardiman’s caution were the March quarter numbers of Harley’s finance unit, which had increased delinquencies and credit losses amid an 8% drop in income. The company said its loan unit’s problems were the temporary symptoms of finicky new software. That, too, could be cause for hope, Hardiman said, if the finance unit’s earnings turn around.
But if delinquencies and loan losses prove lasting, they could be further signs of strain at Harley-Davidson. The company famously refuses to discount its $20,000-to-$30,000 bikes, but as baby boomer bikers ride into the sunset, Harley lenders face a temptation to relax credit standards.
When the software hiccups subside, Hardiman said, Harley expects it will increase its collection and repossession activities. Riders should watch their mirrors for the repo man.