[Updated 01/08/2021] HOG Replace Having gained greater than
[Updated 01/08/2021] HOG Replace
Having gained greater than 151% for the reason that March backside, Harley-Davidson’s inventory (NYSE: HOG) appears to be at its close to time period potential. Our conclusion is predicated on an in depth comparability of HOG’s efficiency towards the S&P 500 now in addition to through the 2008 downturn in our interactive dashboard evaluation, 2007-08 vs. 2020 Disaster Comparability: How Did HOG’s Inventory Fare In contrast With S&P 500?
Due the Covid-19 disaster, HOG, one of many world’s largest motorbike producer and provider, has seen its revenues fall by 22% for the primary 9 months of the yr in comparison with the identical interval within the earlier yr. In Q3 2020, the income fall was arrested as they reported income at $1.2 billion, down 8% y-o-y. EPS was recorded at $0.78 for the quarter in comparison with $0.55 in the identical interval of the earlier yr. Additional, the corporate reported $1.1 billion in money inflows from working actions for the primary 9 months.
We count on Harley-Davidson’s revenues to fall by 20% to $4.Three billion for 2020. Additional, its web revenue is more likely to fall to $310 million, lowering the EPS determine to $2.04 for 2020. Thereafter, revenues are anticipated to stay flat at $4.Three billion in 2021. Additional, the EPS determine is probably going to enhance to $2.13, which coupled with the P/E a number of of 17.5x will result in Harley-Davidson’s valuation round $37.
[Updated 10/23/2020] Harley-Davidson: Restoration Nonetheless To Come?
We consider that Harley-Davidson’s inventory (NYSE: HOG) nonetheless has greater than 20% upside as soon as the worry across the pandemic subsides. HOG trades at $29 at present and it has misplaced round 21% in worth to date this yr. It traded at a pre-Covid excessive of $37 in January, and remains to be beneath that degree. HOG inventory has gained 90% from the low of $15 seen in March 2020, after the Fed’s multi-billion greenback stimulus package deal introduced on March 23rd which lifted market sentiments. The inventory value rose as lockdowns lifted throughout areas making a optimistic market sentiment for the sector. Regardless of the rally in HOG inventory since late March, we consider that the inventory has extra room for development because the worry across the pandemic subsides.
2020 Coronavirus Disaster
Timeline of 2020 Disaster So Far:
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- 12/12/2019: Coronavirus circumstances first reported in China
- 1/31/2020: WHO declares a worldwide well being emergency.
- 2/19/2020: Indicators of efficient containment in China and hopes of financial easing by main central banks helps S&P 500 attain a file excessive
- 3/23/2020: S&P 500 drops 34% from the height degree seen on Feb 19, as Covid-19 circumstances speed up exterior China. Doesn’t assist that oil costs crash in mid-March amid Saudi-led value battle
- From 3/24/2020: S&P 500 recovers 54% from the lows seen on Mar 23, because the Fed’s multi-billion greenback stimulus package deal suppresses near-term survival anxiousness and infuses liquidity into the system.
In distinction, right here’s how HOG and the broader market carried out through the 2007/2008 disaster.
Timeline of 2007-08 Disaster
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- 10/1/2007: Approximate pre-crisis peak in S&P 500 index
- 9/1/2008 – 10/1/2008: Accelerated market decline comparable to Lehman chapter submitting (9/15/08)
- 3/1/2009: Approximate bottoming out of S&P 500 index
- 1/1/2010: Preliminary restoration to ranges earlier than accelerated decline (round 9/1/2008)
Harley-Davidson vs S&P 500 Efficiency Over 2007-08 Monetary Disaster
HOG inventory declined from ranges of round $34 in September 2007 (pre-crisis peak) to ranges of round $Eight in March 2009 (because the markets bottomed out), implying HOG inventory misplaced 72% from its approximate pre-crisis peak. It recovered publish the 2008 disaster, to ranges of about $20 in early 2010, rising by 156% between March 2009 and January 2010. Compared, the S&P 500 Index first fell 51% within the wake of the recession earlier than recovering 48% by January 2010.
Harley-Davidson Fundamentals in Latest Years Have Fallen
Harley-Davidson Revenues fell 10% from $6 billion in 2015 to $5.Four billion in 2019, primarily resulting from a lower in quantity of bike gross sales. Along with a fall in revenues, the corporate’s margins fell from 13% to eight%, leading to a 27% EPS fall from $3.71 in 2015 to $2.70 in 2019. The corporate’s Q2 2020 revenues had been 47% beneath the extent seen a yr in the past, and the EPS determine for the quarter was right down to $-0.60 from $1.23 in the identical interval.
Does Harley-Davidson Have A Ample Money Cushion To Meet Its Obligations Via The Coronavirus Disaster?
Harley-Davidson whole debt elevated from $6.Eight billion in 2016 to $8.03 billion on the finish of Q2 2020, whereas its whole money elevated from $0.Eight billion to $3.86 billion over the identical interval. The corporate generated $610 million in money from its operations within the first half of 2020.
CONCLUSION
Phases of Covid-19 disaster:
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- Early- to mid-March 2020: Worry of the coronavirus outbreak spreading quickly interprets into actuality, with the variety of circumstances accelerating globally
- Late-March 2020 onward: Social distancing measures + lockdowns
- April 2020: Fed stimulus suppresses near-term survival anxiousness
- Could-June 2020: Restoration of demand, with gradual lifting of lockdowns – no panic anymore regardless of a gradual improve within the variety of circumstances
- July-October 2020: Poor Q2 outcomes and lukewarm Q3 expectations, however continued enchancment in demand and a decline within the variety of new circumstances, and progress with vaccine improvement buoy expectations
The precise restoration and its timing hinge on the broader containment of the coronavirus unfold. Our dashboard Developments In U.S. Covid-19 Circumstances offers an summary of how the pandemic has been spreading within the U.S. and contrasts with traits in Brazil and Russia. With buyers focusing their consideration on 2021 outcomes, the valuations grow to be vital to find worth.
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