Shares of Harley-Davidson tumbled Friday on concerns of a possible slowdown in demand for high-end motorcycles.
THE SPARK: Citi analyst Gregory Badishkanian said that after jumping 26 percent in the first quarter, checks with Harley dealers show that the company's U.S. retail sales may have risen between 1 percent and 3 percent in April and early May.
THE BIG PICTURE: The Milwaukee company said last month that its first-quarter profit jumped 44 percent on strong U.S. demand for its motorcycles.
Harley acknowledged at the time that unusually warm winter and spring weather in many parts of the country might have prompted some riders to buy their bikes early, pulling forward sales that would have normally occurred down the road.
As a result, company executives said they expected sales to moderate a bit in the first part of the second quarter.
THE ANALYSIS: Badishkanian, who backed his "Buy" rating and $61 price target for the company, said it's likely that the weather did pull forward some of Harley's spring sales, while also noting that monthly sales trends can be volatile.
As a result, he said investors shouldn't put too much weight on a five-week sales period and predicted that May and June sales should come in closer to normal expectations.
In addition, while some Harley dealers mentioned that their sales were hurt by bike shortages, that continued and growing scarcity should also help boost prices and margins for dealers, Badishkanian said.
THE SHARES: Harley-Davidson Inc. fell $2.40, or 4.7 percent, to $48.27 in heavy afternoon trading, after dropping as low as $48.04 earlier in the day.
Over the past 52 weeks, the company's shares have traded between $31.50 and $54.32. Since the beginning of this year, Harley shares have gained about 30 percent.