Why Harley-Davidson Stock Is Up By 12% Today

Harley-Davidson Stock Rallies After Announcement Of SPAC Deal For Its EV Unit LiveWire

Shares of Harley-Davidson gained upside momentum after the company announced that it will take its EV division LiveWire public via a SPAC deal. LiveWire is expected to trade under the ticker LVW.

The recent IPO of Rivian Automotive highlighted strong demand for EV producers. Investors and traders look ready to buy shares of anything EV-related regardless of valuation as they want to establish positions in the hot segment of the market.

It remains to be seen whether this trend will remain intact when the Fed begins to raise rates in 2022. At this point, investors are confident that Harley’s EV division will get higher valuation on a standalone basis.

What’s Next For Harley-Davidson Stock?

Analysts expect that Harley-Davidson will report earnings of $3.7 per share this year and $3.53 per share in the next year, so the stock is trading at roughly 12 forward P/E. This is cheap for the current market environment, but traders should keep in mind that the company’s earnings are projected to decline next year.

S&P 500 is close to all-time high levels, and the market remains focused on growth. In this environment, a cheap stock like Harley-Davidson may not get enough support from buyers if the company’s earnings are moving lower. In this light, it’s not surprising to see that Harley-Davidson stock lost upside momentum in May and has been under pressure until the announcement of the SPAC deal.

I’d also like to highlight a recent example of a similar move, when a company made an attempt to unlock value for shareholders by taking public its unit in the “hot” market segment. Intel stock enjoyed strong support after the company announced that it would take Mobileye public, but traders used higher prices as an opportunity to take some profits off the table. It remains to be seen whether Harley-Davidson stock will find itself under similar pressure, but it’s a risk that should be closely monitored.

For a look at all of today’s economic events, check out our economic calendar.