Harley-Davidson stock has been riding higher. What's next for HOG?

Yahoo Finance's Brian Sozzi explains Harley-Davidson's turnaround efforts that have won the company favor on Wall Street and one analyst's take on why that could change.

Video transcript

JULIE HYMAN: Harley Davidson shares, they're up 40% since the company spun off its EV business in late September. Harley did get hit with a downgrade today, though. That caught the attention of the man sitting to my right. That is Brian Sozzi. And that's the take today, Sozz.

BRIAN SOZZI: It is, indeed, my take. So let's walk through why Harley shares have been rocking. Certainly a different situation than what we saw last year from Harley Davidson. A couple of key points here-- no more money losing EV business in the mix. Harley spun off its livewire electric vehicle operation in late September. So the Street, in this cost cutting environment, likes to see businesses hatchet off businesses that are, in fact, losing money and unlikely to make money any time soon.

To that point, cost cuts are helping margins. Under new CEO, Jochen Zeitz, they have been cutting a lot of costs from this business. And it is starting to show up in the company's profit margins. And on Jochen, the Street just digs this guy. He has, I think, started to drive a reinvention of the corporate structure at Harley-Davidson, but also the culture inside the company. And you're starting to see, I think, some of the benefits of those efforts. And to that point, we just talked to Jochen Zeitz about the demand environment when they spun off that EV business. Here's what he told us.

And there were some audio issues there, but he essentially said that demand was looking solid. And that was as of late September. What Jefferies is saying, though, right now on Harley, that the sales recovery has slowed. They've talked to dealers, various Harley-Davidson dealers. They have seen sales come under a little bit of pressure here. So maybe that sales recovery has not just continued into year end.

Next up, forward projections by management are too rosy. Harley sees a lot of new riders coming into the motorcycle category over the next decade. What Jefferies is saying that maybe that might not happen. And lastly, valuation too hot when any time you see a stock up 40% essentially in a month, the valuation on the stock is going to be rich. Jefferies saying it might be too rich here. My take? I understand a downgrade, but again, you may want to expect-- wow, there we are on Harleys.

BRAD SMITH: Hey.

BRIAN SOZZI: We are all on Harley-Davidsons. I am just loving all these icons. We are on the open road, looking for-- I don't know-- various news to report on. But I get the downgrade. But I think that the Street still has to dig more into here and understand the turnaround efforts. There is a real turnaround at this company. It's just a matter of, is it sustainable, and can they get more people on bikes?

BRAD SMITH: All right, well, they got us on bikes.

BRIAN SOZZI: They got us on bikes.

BRAD SMITH: We've seen the graphic. Get your motor running, heading down the highway.