There is nothing smooth and sleek about the Aston Martin Lagonda (LSE: AML) share price. While the James Bond carmaker creates luxury motors, its stock is now trading at a bargain bin price of just 48p a share.
On 6 December 2019, less than eight months ago, the Aston Martin share price was riding high at 630p. It has since lost around 92% of its value. Not since Goldfinger got sucked out of a jet aircraft has anything connected with the Bond franchise fallen so far and so fast.
Aston Martin is a top luxury brand, with a lousy financial history. The Warwickshire-headquartered company has gone bankrupt seven times in its 107 years. This is a super-high-risk buy.
New chief executive Tobias Moers takes the wheel from 1 August, having been recruited from Mercedes’ high-performance subsidiary AMG. News of his appointment sparked a recovery in the Aston Martin share price, now he has to deliver in challenging times.
Although the coronavirus crash cannot be blamed for the company’s problems, it hasn’t helped. Car sales almost halved in the first quarter, from 1,057 last year to 578. Losses before tax jumped almost seven-fold from £17.3m to £118.9m.
Aston Martin share price crunch
Moers’ predecessor Andy Palmer made some odd manoeuvres during his six years at the helm, shifting into SUVs, speedboats and Florida property, and running up massive debts along the way. By the end of his tenure, net debt topped £875m, against net cash of just £107m.
January’s emergency £500m cash raise helped ease the immediate threat. With sports car billionaire Lawrence Stroll heading the consortium, market sentiment picked up. Stroll is making sweeping changes, and is focusing “on cost and investment control consistent with restoring profitability”. So can the Aston Market share price get back in gear?
It will be a long haul, with setbacks along the way. Investors took a hit last month, when the group announced a £152m equity raise in late June, selling 304m shares at 50p each. Its Q2 trading statement published at the same time inevitably showed lower retail sales and wholesale, with dealer stock reduced by 617 units.
On a more positive note, at least more than 90% of its dealer network is now open. There are some “positive” signs coming out of China. Forward orders for its new DBX SUV appear strong.
A really high-risk buy
The new management team is going back to basics, focusing on high-performance cars and racing, rather than property offshoots and whatnot. It will have to drive a recovery in the teeth of a pandemic, which now seems to be threatening a second wave of economic misery.
The Aston Martin share price is ultra cheap for a reason. Despite attempts to boost financial stability, net debt still stood at £883m on 31 May, against cash of £244m. My big worry is that the iconic brand names sucks in dreamers, who will struggle to make success a reality. This is the ultimate boy’s toy.
If you want to inject some risk to your portfolio, Aston Martin could be the stock for you. But only invest money you can afford to lose!
