The Aston Martin share price: why I’ve turned positive on the stock

It looks to me as if the Aston Martin share price has turned a corner. Therefore, I’m considering buying the stock once again. 

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

On several occasions over the past few years I’ve taken a look at the Aston Martin (LSE: AML) share price. However, I’ve never pulled the trigger on this investment. There are a couple of reasons why I’ve stayed away. The group’s weak balance sheet and lack of profitability are the two most prominent. 

But it looks to me as if the firm is finally starting to turn the corner. With that being the case, I’m considering buying the stock once again. 

Aston Martin share price performance 

It isn’t easy to get excited about the company’s prospects based on its share price performance this year. The stock has lost around 90% of its value year-to-date. Only the most risk-tolerant investors would be willing to dive into the business following this show. 

Nevertheless, in my opinion, this performance undervalues the company’s progress in 2020. After a near-death experience, Aston Martin has pulled out all the stops over the past 12 months.

A substantial capital raising from new and existing shareholders has fortified the balance sheet. Meanwhile, a new management team, cost-cutting efforts, and a programme to get rid of unnecessary inventory have helped streamline the business. 

That being said, despite these efforts, the company isn’t out of the woods just yet. It still isn’t profitable and isn’t expected to be for the next two years. 

Nevertheless, I think the business is an entirely different beast today than it was at the beginning of the year. That’s why I’ve been taking a closer look at the Aston Martin share price recently.

Growth potential

What I’m excited about is the company’s growth potential. Aston Martin is one of the world’s most sought-after luxury car makes. The brand alone is worth several billion pounds. Its cars sell for hundreds of thousands of pounds, and one of its latest models, the Valkyrie, will be priced at £2.5m

Comparing the business to peer Ferrari, it’s clear Aston Martin isn’t living up to its full potential. Shares in the former are up 18% over the past 12 months. 

So, I’ve been asking myself where has Aston Martin gone wrong? It seems to me that the firm’s made several significant errors. These include making too many cars, which has stopped the organisation from making the most of its brand exclusivity, and not investing enough. The company’s new management appears to have eliminated these problems. By reducing the total output, Aston Martin has also been able to lower costs. 

As such, I think the car producer has put its major problems in the rearview mirror. That’s why I’m now taking a closer look at the Aston Martin share price once again. The business seems to have turned a corner and, if it can manage to replicate even a sliver of Ferrari’s success over the next few years, profits could surge.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

2 powerful passive income stocks investors should consider snapping up

Building a passive income stream via dividend-paying stocks is possible, according to our writer, who details two picks to take…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing For Beginners

This UK stock has gained 42% since I bought it, but I think it’s still a bargain

Jon Smith outlines his reasons for thinking that a UK stock he owns has the potential to keep rallying for…

Read more »

Investing Articles

1 under-the-radar value stock I’m eyeing up for returns and growth

This Fool is looking for quality stocks at bargain prices and reckons this potentially overlooked value stock could be a…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

National Grid shares have plunged — but if I’d bought 2 years ago, would I be in profit?

National Grid shares are about 22% lower than in May, but that may just be a small blip for long-term…

Read more »

Investing Articles

This FTSE 250 stock looks unmissable — but buying shares now could be a mistake for me!

It’s tough when a stock looks fundamentally sound, but there’s a cloud hanging over it. This is what’s happening with…

Read more »

A Black father and daughter having breakfast at hotel restaurant
Investing Articles

Raspberry Pi shares are piping hot! Should I invest right now?

Raspberry Pi shares are certainly bearing fruit for those lucky enough to have invested early. Have I missed the boat…

Read more »

Dividend Shares

How much passive income from stocks could I make with a £37k salary?

Jon Smith takes a look at how much passive income he could make by squeezing all the juice out of…

Read more »

Young female analyst working at her desk in the office
Investing Articles

The Ashtead share price falls on FY results. Is it a good long-term buy?

High interest rates are bad for companies with high debt, especially if it's growing. But the effect on the Ashtead…

Read more »