Harley-Davidson's EV Pivot: Can LiveWire Steer HOG to Growth Amid Earnings Crossroads?

Harley-Davidson (NYSE:HOG) is set to report its Q2 2025 earnings on July 24, a critical juncture for the iconic motorcycle maker as it navigates a dual challenge: declining sales in its core business and the uphill battle to turn its electric vehicle (EV) subsidiary, LiveWire, into a profitable growth engine. With shares down 23% over the past year, investors are asking: Is Harley's EV transition a lifeline or a liability? And can the company's financial resilience withstand the headwinds?

LiveWire: Struggling to Gain Traction, but Showing Marginal Progress

LiveWire's Q1 2025 results were grim: electric motorcycle sales plummeted 72% to just 33 units, compared to 117 in the year-ago period. Revenue for the segment dropped 42% to $3 million, underscoring the difficulty of competing in a crowded EV market dominated by Tesla and startups like Zero Motorcycles. However, there's a silver lining: the segment's operating loss narrowed to $20 million from $29 million in Q1 2024. Cost-cutting measures, including reduced R&D spending and a focus on high-margin products, appear to be buying Harley time.

The bigger question is whether LiveWire can scale. Management projects 1,000–1,500 unit sales for 2025, a modest goal given the division's struggles. To succeed, Harley must leverage its brand equity and dealer network while addressing pricing and range limitations. Competitors like Zero have already achieved profitability, so LiveWire's path to breakeven—estimated at $49 million cash burn this year—will be a key metric to watch in Q2.

Margin Pressures: Core Business Stumbles, Financial Services Shines

Harley's motorcycle division faces a perfect storm: global retail sales fell 21% in Q1, with North America down 24% amid high interest rates and shifting consumer preferences. The company's response? A cost-cutting “Hardwire” initiative targeting $150 million in annual savings by 2026.

Meanwhile, Harley's financial services arm, HDFS, remains a bright spot. Its operating income rose 19% in Q1 to $122 million, driven by disciplined underwriting and a strong portfolio. This contrasts sharply with the motorcycle division's 27% revenue decline. Investors should scrutinize whether HDFS can offset ongoing margin pressures in the core business, which now operates with a 7.0%-8.0% margin target for 2025—a steep drop from prior years.

Dividend Sustainability: A Lifeline for Bulls, a Concern for Skeptics

Harley's $0.18 quarterly dividend (a 2.9% yield at current prices) has been a rare constant amid turmoil. The payout ratio of 26% in Q1 suggests ample cash flow to maintain it, even if earnings shrink further. However, the dividend's sustainability hinges on two factors:
1. LiveWire's cash burn: If losses exceed $49 million, capital could be diverted from shareholder returns.
2. Debt levels: Harley's net debt remains manageable at $1.9 billion, but aggressive reinvestment in EVs could strain flexibility.

Analysts are split: DA Davidson maintains a “buy” with a $31 price target, citing undervalued assets and dividend resilience, while Citigroup downgraded HOG to “neutral,” citing LiveWire's risks.

Analyst Revisions and Valuation: A Mixed Picture

The consensus EPS estimate for Q2 2025 is $0.96, down 41% from Q2 2024's $1.63. Analysts have slashed 2025 earnings forecasts by 20% over the past six months, reflecting skepticism about Harley's ability to stabilize.

At a P/E of 9.2 (vs. the industry's 22 median), Harley trades at a deep discount. Bulls argue this reflects worst-case scenarios, while bears see no catalyst for a rebound. The stock's 52-week range of $20.45–$39.93 highlights volatility, with shares currently at ~$25—a level that could test support if Q2 results miss.

Investment Thesis: Buy the Dip, or Wait for Proof?

Case for Buying HOG:
- Dividend and cash: A 2.9% yield with $1.9 billion in cash offers downside protection.
- LiveWire's margin progress: The narrowing loss shows discipline, even if sales lag.
- Valuation: The stock is priced for failure, offering a margin of safety if the company executes on its Hardwire plan.

Case for Caution:
- EV market saturation: LiveWire's niche is crowded, and Harley's late entry complicates differentiation.
- Macro risks: High interest rates and weak consumer spending could prolong the sales slump.
- Analyst sentiment: A “Hold” consensus with a $29.83 average target suggests limited upside enthusiasm.

Verdict: A Speculative Buy, but Mind the Risks

Harley-Davidson is a high-risk, high-reward bet. Investors willing to bet on a turnaround should look for Q2 catalysts:
1. A beat on the $0.96 EPS estimate.
2. Signs LiveWire's cost controls are working (e.g., unit sales above 300, or a narrower loss).
3. Evidence that motorcycle sales are stabilizing, particularly in the U.S. Touring segment (which grew 5% in Q1).

If these markers are met, Harley's valuation could expand. However, if Q2 repeats Q1's top-line misses, the stock could test $20. For now, the $25 level offers a speculative entry, but with a tight stop-loss and a long-term view. Harley's future hinges on LiveWire's success—and there's no guarantee it will roar back.