Harley (HOG) Widens Electric Portfolio With StaCyc Acquisition

Harley-Davidson, Inc. (NYSE:HOG) geared up to enter the kid’s electric bike market, with the acquisition of California-based StaCyc Inc. Founded in 2016, the acquired company designs and sells electric-powered two-wheeled bikes for children. The acquisition will broaden Harley’s portfolio to meet the need of customers across varied age brackets.

Over the past few years, the U.S.-based motorcycle manufacturer has been struggling to gain customers as its core customer base is aging. Among many regions, the company is experiencing a continuous weakening demand in its key market i.e. the United States, which partly affected worldwide retail sales to decline 6.1% year over year to 228,051 units in 2018.

Adding StaCyc’s products in the portfolio will aid Harley to acquire new riders outside its core customer base. Further, StaCyc’s presence in the United States will provide Harley a chance to slightly recover its market share in the country.

Harley-Davidson, Inc. Price and Consensus

The acquired company will operate as a subsidiary of Harley that will sell Harley-Davidson branded version of 12-inch and 16-inch models through selected Harley dealers. These branded products are expected to be available from the third quarter of 2019 in the United States. However, StaCyc’s existing brand, EDRIVES will continue selling products through its existing distribution network.

StaCyc widens Harley’s electric portfolio beside presenting it an entry point for catering the youngest customer group. This fulfils Harley’s aim to offer a full range of electric products for a huge audience group, per its management. Apart from this, Harley is set to launch its first electric motorcycle sans traditional clutch and gear-shift controls by the fall of 2019.

Despite offering such innovative products in the near term, the company’s revenues are expected to witness a downturn in 2019. It projects motorcycle shipments of 217,000-222,000 units in 2019, the lowest since 2010. Expenses related to manufacturing process optimization and ramping up of international facilities to build motorcycles for its European customers along with lowering volumes across all the major markets are headwinds.

Over the past month, shares of Harley have outperformed the industry it belongs to. During that period, shares of the company have gained 5% compared with the industry’s decrease of 3.2%.

Zacks Rank & Stocks to Consider

Harley currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader auto sector are General Motors Company (NYSE:GM) , CarGurus, Inc. (NASDAQ:CARG) and Fox Factory Holding Corporation (NASDAQ:FOXF) , each presently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

General Motors has an expected long-term growth rate of 8.5%. Shares of the company have gained 12.3% in the past six months.

CarGurus has an expected long-term growth rate of 5%. Share price of the company has increased 1.1% in the past month.

Fox Factory has an expected long-term growth rate of 15.1%. Over the past month, shares of the company have gained 4.6%.

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