Harley-Davidson hit a 52-week high Monday and Citi said that it appears first-quarter motorcycle sales have been strong.
THE SPARK: Citi Investment Research & Analysis analyst Gregory Badishkanian said that strong sales momentum from last year appear to be carrying over into the first quarter.
A survey of Harley-Davidson dealerships showed that sales were up in January and February. Badishkanian believes March sales will be key to determining overall performance for the quarter, but that investors should be encouraged by sales in the first two months.
Warm weather played a role in the higher sales, Badishkanian wrote. But even excluding that factor, it appeared that the underlying momentum is strong. He said inventories remain lean at dealerships and credit availability remains steady.
That bodes well for future sales, he said.
THE BIG PICTURE: Shares of Harley-Davidson crashed during the economic downturn of 2008 and 2009, when consumers cut back sharply on discretionary spending and loans for motorcycles became harder to get.
Customers have been slow to go return to dealerships amid the sluggish economic recovery, and slower to drop thousands of dollars on a hog.
THE ANALYSIS: Because of the higher sales, Badishkanian raised his target price on Harley-Davidson's stock to $50 per share from $46 per share. That was higher than Friday's closing price of $46.88 per share.
He rated the company's stock as "Neutral," saying there was still risk that sales could slow if higher interest rates make it harder to get loans or if retail demand slows.
THE SHARES: Shares rose $1.25, or nearly 3 percent, to $48.13 in midday trading. The company's stock has been steadily rising since August, gaining 50 percent since that month when the stock hit $32.11 per share.
The stock is now trading above the levels reached before the financial crisis hit in 2008, when the stock could be had for about $42 each. In 2007 the stock was worth almost $65 a share.