Harley-Davidson, Inc. (HOG): A Bull Case Theory

Core Thesis - Harley-Davidson, Inc. is viewed as a deep-value investment opportunity, trading below tangible book value, indicating that the market assigns little value to its strong brand presence in the motorcycle industry [2][3]. Company Overview - Founded in 1903, Harley-Davidson is a key player in American motorcycling culture, known for its strong brand loyalty [3]. - The company's stock is currently trading at $21.25, with trailing and forward P/E ratios of 5.09 and 6.76 respectively [1]. Valuation Insights - The current market valuation suggests that Harley-Davidson's intangible assets, including its brand and financing arm, are being valued at nearly zero, reflecting investor pessimism rather than the company's intrinsic worth [3]. - A sum-of-the-parts analysis indicates that the intrinsic value of Harley-Davidson could approach the low-$30s per share, suggesting a potential upside of over 50% [7]. Challenges Faced - The company's valuation discount is attributed to both self-inflicted challenges, such as past management decisions and a shift in focus towards younger demographics, and external macroeconomic pressures like high interest rates and weak consumer sentiment [4][5]. - Recent leadership changes are aimed at refocusing on core operations and profitability, which may help address these challenges [5]. Strategic Moves - Harley-Davidson's decision to sell a 10% stake in Harley-Davidson Financial Services (HDFS) has raised investor concerns, but this move is seen as a way to de-risk the business while maintaining operational control [6]. - The transaction, which transfers $4 billion of loans off the balance sheet, is expected to bring in institutional investors like KKR and PIMCO, validating the value of HDFS [6].