Aston Martin (LSE:AML) shares are down 74% over the past 12 months. But that’s not the worst of it. The luxury car maker in down 94% over the past three years. It’s currently trading for just a fraction of its listing price.
Why is the share price down?
The stock has to be one of the worst flotations in recent years. The firm has continually disappointed investors over the last three years, taking on more debt and failing to expand in line with expectations.
And things haven’t improved this year. In July, Aston Martin said first-half losses had widened as supply chain constraints hit production. The firm reported a pre-tax loss of £285.4m in the six months to June 30, compared with a loss of £90.7m a year ago.
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Aston sold 2,676 vehicles wholesale during the six months, compared with 2,901 a year earlier.
However, the luxury car maker, which is pinning a lot of its hopes on Chinese sales, said that it expected a better second half of the year.
“For 2022, we continue to expect to deliver significant growth on 2021 with an 8% increase in core volumes expected to deliver a 50% improvement in adjusted EBITDA from the core business“, the company explained.
Outlook
Executive chairman Lawrence Stroll has lofty ambitions. In 2021, Aston Martin shipped 6,600 cars. But by 2024/25 Stroll hopes to increase this number to 10,000 per year. The chairman also wants to achieve £2bn in revenues and £500m in adjusted EBITDA by 2024/25.
Revenue for 2021 was just over £1bn. Whether the firm has the capacity to double that in four years, I’m not sure. While there certainly hasn’t been any progress in terms of deliveries over the past six months, it’s important to note that revenue growth is unlikely to be consistent or regular. The pandemic, inflation, a recession, and Chinese lockdowns are all playing on demand.
What’s next for the share price?
One thing that does concern me is growing debt. Net debt stands at a sizeable £1.26bn, with a cash balance of just £156m. It also sounds like there’s plenty of revenue tied up in unfinished cars.
Yet I’m confident that we’ll see some positive data coming out of the business soon. And I really can see the share price shooting upwards if the firm makes progress towards Lawrence Stroll’s targets.
I do genuinely believe that there’s demand for 10,000 new Aston Martins a year out there. It’s an immensely cool brand and I really don’t think any other supercar maker comes close when I look at the attractiveness of the vehicles themselves.
I’ve bought Aston Martin shares, and they haven’t done well. But I’d buy more and hold them for the long run. I’d at least give the firm the chance to hit its 2024/2025 targets.
