Analyst David Coleman said in a note to clients that the upgrade reflects his positive view of the company’s new strategic plan, which was recently announced by acting CEO Jochen Zeitz.
"We expect the plan, called 'The Rewire,' to result in a solid recovery for Harley as the economy restarts," Coleman said. "The company is also working to mitigate the impact of the pandemic through salary cuts, hiring freezes, and adjustments in its new product launch schedule. It has also suspended share buybacks and cut its dividend."
Coleman noted that Harley-Davidson shares have fallen more than 40% over the last quarter and are trading near the low end of their 52-week range and at six-times his 2021 estimate.
"We believe that the pullback provides risk-tolerant investors with a favorable entry point, and are setting a target price of $30," he said.
Last month, Harley-Davidson missed Wall Street's first-quarter earnings expectations. Coleman noted U.S. retail sales fell 15.5% year over year, while international sales were down 20.7% due to the coronavirus pandemic.
The analyst acknowledged that the company was facing "significant risk" from the coronavirus outbreak as it has stopped production and closed its retail stores.
"Knowing that it cannot rely solely on its traditional clientele, predominantly white male baby boomers," he said, "Harley has been working hard to appeal to women, minorities, and younger Gen X and Millennial consumers, as demonstrated by its plan to launch 100 new “high-impact” models over the next 10 years."
Although Harley will need time to roll out these new motorcycles, and will face higher production costs in the near term, Coleman said, "We expect the wide variety of new models to better address customer preferences."