I believe LiveWire (New York Stock Exchange: LVWR) is worth $35.93, which is a ~372% upside since the date of writing. Speed. Elegance. Class. Prototype after prototype, LVWR is taking the motorcycle world by storm. Every investor wants a business in which his investment can generate windfall profits. This is such a company, and it is taking the world by storm.
With its cutting-edge technological advancements, LiveWire has been ahead of many other motorcycle companies. In 2019, Harley-Davidson introduced prototypes of its electric motorcycles to the world, setting off a wave that spawned more two-wheel electric motorcycles. These prototypes have now reached market viability, as the Harley-Davidson (HOG) LiveWire became the apex premium motorcycle in the US and Europe in both 2020 and 2021. HOG launched LiveWire as its own brand in 2021, with LiveWire ONE making its debut. in July of the same year.
Great market opportunity
The high-value internal combustion engine [ICE] and the electric vehicle market for LiveWire is estimated at $40 billion in sales (according to LVWR’s prospectus) in North America, Europe, and China. LiveWire’s trademark lies in its light, medium and heavy motorcycle segments. In 2020, light motorcycle sales skyrocketed to $9 billion, while medium and heavy motorcycles totaled $17 billion. Sales of the middleweight and heavyweight models piled up in Asia and Europe, where customers preferred heavier motorcycles.
With an aggressive push, EVs are expanding far and wide with these four spearheads sure to become the core of the industry for LVWR:
- Technological improvements: This has ensured that enthusiastic users get excellent performance electric vehicles at lower costs. The charging infrastructure and most of the technologies used in cars are retained in electric vehicles. Focusing resources in this direction will further benefit the electric motorcycle market.
- Consumer Adoption – Ever since they became more aware of electric powertrains and their sustainability, consumers have shifted their focus to electric vehicles. This decision is made easier through the lower price points involved, as more than 50% of consumers have opted for electric or hybrid vehicles.
- Government support: Governments around the world are supporting the mission to revolutionize the electric vehicle market, particularly in urban settings. These measures include stricter regional emissions regulations. I think EV purchases will skyrocket as the US government decides to invest in charging infrastructure.
- Product Availability and Convenience: The LiveWire electric vehicle is every user’s dream. It cuts down on noise and introduces more awesome features like automatic gear shifting. For consumers who practice horse riding as a sport, this is irresistible merchandise.
Users who have migrated to LiveWire have enjoyed a superior driving experience and immense performance benefits from using this electric powertrain. Without using a clutch or gears, you can get instant power delivery and linear acceleration. Many other ICE riders are expected to adopt LiveWire motorcycles in endless streams. I hope that new riders will fall in love with motorcycles once they realize how easy they are to ride, how exciting they are and how long they last.
Strong strategic partnership with HOG
For the past 119 years, HOG has been one of the most recognized motorcycle brands in the world. Its capabilities in the design, development, manufacture, marketing and distribution of vehicles are unquestionable worldwide. Aside from the transitional service agreements that accompany the split, LiveWire uses HOG’s skills in two very important areas: technical services and contract manufacturing.
These are the key services provided by HOG, which I think help LVWR a lot:
- Product Development and Testing: This ranges from the design and development process of LiveWire product components to physical testing in the HOG shop. LiveWire electric vehicles will be tested for durability, performance, vehicle dynamics, failure assessment, and regulatory compliance. This is done in conjunction with a virtual test that simulates electric vehicle performance.
- Regulatory Support: Different regions in different countries support certificate submissions.
- Warehouse Support – This involves writing and reviewing required service communication materials such as service manuals, parts catalogs, and instruction sheets for LiveWire.
- Marketing Vehicle and Fleet Center – Helps LiveWire receive, configure, store and provision LiveWire fleet vehicles that exceed road safety standards.
LVWR ARROW architecture provides scalability
Investors in LiveWire should become familiar with a new, scalable architecture on which future LiveWire vehicles could be built. The ARROW project would be launched into the production process in 2023. ARROW has a patented battery, motor, charging and control system. It is designed to be the core component of the motorcycle chassis.
This incredible invention, created by the team at LiveWire, harnesses the benefits of modular and scalable architectures in vehicle systems and software. This approach is designed to limit recurring investment and reduce lead time for new models, while keeping customer satisfaction in mind.
Using the ARROW system, the production team can enhance every attribute of the electric motorcycle for a pleasurable riding experience. With ARROW, LiveWire is in full control of the nascent electric vehicle, making it easy to upgrade both hardware and software. The work is done faster and better because the manufacturing drawings are easy to change and adapt to newer models.
Opportunity to capture revenue stream from adjacent service provision
LiveWire is well positioned to explore growth opportunities beyond the electric motorcycle market. For example, when a customer purchases a LiveWire electric vehicle, LiveWire could upsell the customer’s access to an optimized set of financing and protection offerings tailored to their purchase specifications.
In addition to manufacturing high-quality electric motorcycles, LVWR could strengthen its relationship with its customers through the sale of branded parts, safety equipment and clothing. Other services include maintenance and repair, which will be performed by LiveWire’s maintenance and repair staff.
I believe LVWR is worth $35.93 in FY25, which is a 372% advantage as of the date of writing.
This value is derived from my model based on the following assumptions:
- Revenue growth will follow management’s mid-term estimates through FY26. Growth will be supported by more unit sales as LVWR captures more market share.
- Valuation-wise, I think LVWR should be trading around 5x revenue, a slight discount from where Tesla (TSLA) is trading today given that it is a weaker brand with no earnings.
Since we are already 5 years into the future, each of these assumptions is highly questionable and may not come true. In any case, we need to estimate how much LVWR might be worth if it meets the guidance, and my model indicates a significant upside if it does.
No significant income or cash flow in the short term
LiveWire, despite its pioneering innovations, continues to tread uncharted territory. You have incurred your fair share of losses and expenses. For now, there is no stable and predictable cash flow. As a new product, there are no deadlines to make references to the demand for electric vehicles. LiveWire is paving the way for newer companies at their expense.
LiveWire is entering a competitive industry. It will compete with major electric vehicle companies focused on ICE and others. Now that LiveWire has joined the electric vehicle market, other companies are following suit.
At the time of writing, LVWR is undervalued at its current share price. I believe LVWR’s large TAM and existing partnership with a strong incumbent provides a great opportunity for growth. More importantly, it has a set of patented technologies that guarantee high quality products.