Harley Crashes After Dual Downgrades On Valuation, 'Unconfirmed' Takeover Rumors

Shares of Harley-Davidson (HOG) are sliding after UBS and Baird both downgraded the stock this morning. UBS analyst Robin Farley said he sees limited upside and little room for multiple expansion, advising investors to stay on the sidelines. In a separate note, Baird analyst Craig Kennison pointed out that he found no evidence to support Friday's takeover interest rumors, making him unable to sustain an Outperform rating on the shares following their associated surge higher.

NO TAKEOUT EVIDENCE: Baird downgraded Harley-Davidson to Neutral citing valuation following unconfirmed rumors that circulated Friday that KKR (KKR) may be interested in acquiring the company for $65 per share. The research firm said it had no information that would corroborate the takeout speculation and was unaware of any credible source behind the rumor, adding that it would need evidence to support a takeover scenario to sustain an Outperform rating on Harley-Davidson's shares.

LIMITED UPSIDE: UBS' Farley downgraded Harley-Davidson to Neutral from Outperform as he sees limited upside to expectations and little room for multiple expansion, given key risks of an aging rider demographic and market share incursion from the revived Indian brand. Farley noted that he has no view on Friday reports that the company could be the target of a takeout, and that the only value he saw in the name was due to its high free cash flow, good brand name and under-levered balance sheet last year. The analyst kept his $57 price target on the shares.

RUMORS SPIKED SHARES: On Friday, Harley Davidson's shares jumped amid rumors of potential takeover interest by private equity. Contacted by The Fly, the motorcycle maker said it would not "comment on market rumors and speculation," adding that it "has periodically been the subject of marketplace speculation of various sorts." KKR, one of the names identified as a possible suitor, also declined to comment.

PRICE ACTION: In late morning trading, shares of Harley-Davidson have dropped about 10.5% to $48.49, though this is still not enough to shed Friday's advance of almost 20%.