Harley-Davidson, Inc. (NYSE: HOG) has entered into an agreement with the city of Sturgis, South Dakota, the home of the Sturgis Motorcycle Rally. The company and city officials will be making Harley-Davidson the official motorcycle of the rally for the next 75 years.
While we have not seen the terms of this agreement, the question to ask is whether or not this is smart for Harley-Davidson. Sturgis is one of the top motorcycle events in the world, and the company is announcing this effort while the economy is incredibly strong. How many recessions will there be over the next 75 years? What will inflation be like over the next 75 years. How much of the local and tertiary business during and after Sturgis would Harley-Davidson get whether it made this sponsorship pact or not? There are a lot of questions to ask, and the answers are likely very elusive.
Historically, Harley-Davidson has been the motorcycle of choice for the rally for decades and by the looks of it, it will continue to be.
Under the agreement, a permanent plaza will be built on Main Street in Sturgis that will include a stage for events, concerts and even weddings. This is expected to be completed in time for the current year’s 75th rally. The new multi-purpose stage will be built from the bricks from the company’s Milwaukee headquarters as an homage to the legacy that Harley-Davidson has meant to that town.
Matt Levatich, President and CEO of Harley-Davidson, commented on the agreement:
Harley-Davidson riders have attended the Sturgis Motorcycle Rally for decades. This new agreement will help fuel many more years of freedom, independence and rebellion for this iconic gathering. Riding is a passion passed down through generations, so it’s important we celebrate the legacy and history of Harley-Davidson in Sturgis, while helping creating new memories.
Shares of Harley-Davidson closed Thursday down 1% at $62.64. However, shares have roughly recovered to even in post market trading. The stock has a consensus analyst price target of $73.08 and a 52-week trading range of $54.22 to $74.13.
As far as investors are concerned, this Sturgis pact may not be a serious game-changing bit of news. Still, it makes you wonder if Harley-Davidson or the town of Sturgis got the upper hand in this deal.
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