Rare Upgrade Sends Harley-Davidson Stock Soaring

An unwinding of pessimism could give HOG an extra boost

Deputy Editor
Mar 31, 2021 at 11:24 AM
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The shares of Harley-Davidson Inc (NYSE:HOG) are up 7.3% at $40.29 this morning, following an upgrade from Baird to "outperform" from "neutral." This is the first time since 2016 the analyst has turned bullish on the stock, noting a promising shift in strategic direction and slimmer inventories. Meanwhile, Wedbush also chimed in, lifting its price target to $43 from $42. 

There's still plenty of room for analysts to follow Baird's lead, as the 12-month consensus price target of $38.25 is a nearly 5% discount to current levels. Plus, coming into today, nine of the 13 analysts in coverage still considered HOG a "hold."

Today's price action has HOG trading its highest level in nearly two months, closing its early February bear gap, and toppling recent pressure at its 80-day moving average. The equity sports an impressive 112.7% year-over-year lead, and is looking to close out the month of March with a solid 13% win. 

While short interest has been on the decline, a further unravelling could put even more wind at the stock's back. Short interest fell 8.8% in the last two reporting periods, though the 16.64 million shares sold short make up a solid 10.9% of HOG's available float, and would take almost eight days to cover at its average daily pace of trading. 

A shift in the options pits could also give HOG a boost. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Harley-Davidson stock sports a 10-day put/call volume ratio of 2.17, which stands higher than 79% of readings from the past 12 months. This implies puts are being picked up at a much quicker-than-usual clip. 

For those wanting to speculate on the equity's next move, options can be had at a relative bargain right now. This is per the stock's Schaeffer's Volatility Index (SVI) of 46%, which sits in the very low fifth percentile of its annual range. In other words, options traders are pricing in low volatility expectations for the motorcycle manufacturer at the moment.  

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