The Aston Martin (LSE:AML) share price has had a rough couple of years. And the pandemic certainly didn’t help matters. After burning through its cash reserves and reporting increasing losses, the company has seen its stock drop by more than 80% since its 2018 IPO.
But recently, the share price has been back on the rise. And over the last 12 months, it’s up by more than 180%! Is the business making a comeback? Let’s take a look.
The rising Aston Martin share price
I’ve previously explored why the Aston Martin share price started climbing last year. But as a reminder, earlier in 2020, the company received a £500m rescue package from Canadian billionaire Lawrence Stroll. After this, the firm began a major restructuring that saw the introduction of Tobias Moers as the new CEO.
Since the last time I looked at it, Aston Martin has published its first-quarter results for 2021, and they were actually quite promising. Total revenue for the quarter surged by 153% compared to a year ago, reaching £224.4m. This growth was almost entirely organic and mainly stemmed from the immense popularity of the newly launched DBX model. Despite having a lofty price tag of £158,000, Aston Martin sold 746 of these cars.
Looking at the performance of its other models, the GT line of vehicles didn’t fare as well, with total deliveries dropping by 24%. But its classic Sports line more than made up for it with 312 cars sold — a 66% increase compared to a year ago.
Despite these impressive figures, the company still reported a £42.2m loss for the period. But that’s a substantial improvement compared to the £110.1m loss recorded in the first quarter of 2020. Overall, it looks like the business achieved some pretty decent results, I feel. So why did the Aston Martin share price stay basically flat on the news?
The risks that lie ahead
Overall, the management team remains confident in its ability to sell a total of 6,000 cars in 2021. And after these latest results, it’s 23% of the way there. While this may seem slightly behind, it’s worth noting that Aston Martin is launching two new models, the Valkyrie and V12 Speedster, in the second half of this year.
However, there remains some reasonable concern surrounding the firm’s level of debt. As of the end of March, Aston Martin has just under £1.3bn of debt to contend with. That’s around 63% of the firm’s capital structure, adding a notable level of solvency risk. After all, with large debt comes a hefty interest bill estimated to be around £145m for this year.
This is still a manageable amount, especially since Aston Martin has £575m of cash on the balance sheet. But this source of funds is finite. And as the business is still unprofitable, it may have to raise additional capital to afford these expenses in the future.
What to do now?
Needless to say, I find these latest results quite encouraging as they show signs that the strategy being employed by the new management team is working. However, I think it’s still too soon to tell for sure. And given that the Aston Martin share price hardly moved on these results, it seems other investors agree.
For now, this business is staying on my watch list. But I’m excited to see how it performs throughout 2021.