Harley-Davidson's (HOG) newly outlined medium-term targets have improved investor sentiment following stronger retail trends and cost-cut initiatives, but warned that execution risk remains elevated given a still-weak demand backdrop for large motorcycles, Morgan Stanley said in a Tuesday note.

The analyst it raised its 2026 earnings per share estimate to $0.24 from $0.01 and lifted its 2027 estimate to $1.05 from $0.85, citing stronger HDFS performance, expected normalization of promotional activity following Q1 inventory clearance, and earlier realization of more than $150 million in cost savings, alongside tariff-related tailwinds.

Morgan Stanley noted recent share gains and near-term retail strength have supported the stock, but said it remains cautious on underlying demand for 601cc plus motorcycles, which have shown a long-term decline, potentially limiting the sustainability of Harley-Davidson's growth ambitions.

The researchers said the company's updated assumptions for retail growth, margin expansion and cost savings are largely built on bottom-up initiatives such as new product launches, including the Sportster reintroduction, but remain aggressive relative to historical industry trends.

Morgan Stanley maintained its underweight rating on the stock while raising its price target to $15 from $12.

Shares of Harley-Davidson were down more than 4.2% in Tuesday trading.

Price: 23.41, Change: -0.94, Percent Change: -3.86