Leisure check: Life Time Group is upgraded by Morgan Stanley, while Harley-Davidson is cut

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Morgan Stanley checked in on leisure stocks on Monday as it evaluated the impact of affordability issues.

Analyst Stephen Grambling and his team highlighted that leisure products and services stocks have underperformed the S&P 500 this year following a pullback around "liberation day" and the initial tariff shock, with only a partial recovery since. It was noted that there was a divergence across the group, with Polaris (PII [https://seekingalpha.com/symbol/PII]) rebounding sharply to be on par with the best performance YTD, along with Life Time Group (NYSE:LTH [https://seekingalpha.com/symbol/LTH]), which gained all its ground in the first months. By contrast, Vail Resorts (NYSE:MTN [https://seekingalpha.com/symbol/MTN]) has been the biggest laggard amid its management shuffle.

The firm's analysis on affordability and pricing power indicated that fitness and drinkware were the two sub-segments that were able to both grow margins and take pricing across the leisure group. In terms of rating changes, Life Time Group (NYSE:LTH [https://seekingalpha.com/symbol/LTH]) was upgraded to Overweight from Equal Weight, and Harley-Davidson (NYSE:HOG [https://seekingalpha.com/symbol/HOG]) was lowered to Underweight from Equal Weight.

Life Time Group (LTH [https://seekingalpha.com/symbol/LTH]): "We expect upside to consensus estimates as accelerating new club growth improves membership trends coupled with sustained pricing and in-center spend. As beats unfold, DD% EBITDA growth and multiple expansion more aligned with the company's growth algorithm drive 51% upside to our base case... Just as important, LTH's value proposition and customer engagement have a proven history of resilience through cycles, limiting a downside scenario and underscoring one of the most attractive risk-adjusted return potentials in our leisure coverage."

Harley-Davidson (NYSE:HOG [https://seekingalpha.com/symbol/HOG]): "HOG scores at the bottom of our leisure framework due to a combination of low pricing power and weak secular trends. We see these factors combined with competitive pressures overwhelming a cyclical recovery for the motorcycle industry and leading to further downward revisions vs. consensus."

Morgan Stanley kept an Overweight rating on Planet Fitness (NYSE:PLNT [https://seekingalpha.com/symbol/PLNT]) and left the Equal Weight ratings on Vail Resorts (NYSE:MTN [https://seekingalpha.com/symbol/MTN]), Yeti Holdings (YETI [https://seekingalpha.com/symbol/YETI]), Polaris (PII [https://seekingalpha.com/symbol/PII]), and Brunswick (BC [https://seekingalpha.com/symbol/BC]) alone.

MORE ON THE LEISURE SECTOR

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* Vail Resorts: Better Days Ahead? [https://seekingalpha.com/article/4827023-vail-resorts-better-days-ahead]
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