Does today’s AML share price weakness give me a buying opportunity?

The Aston Martin share price has fallen back from its 2021 high, despite decent Q1 figures. I’m wondering whether it’s time to buy.

| 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.

Aston Martin Lagonda (LSE: AML) is in the news again, and it’s never good news when it’s something that’s going to hit the bottom line. It’s all about a dispute with Swiss car dealer Nebula Project. Aston Martin alleges the dealer withheld customer deposits for its Valkyrie sports car, and has commenced legal action. The dispute is apparently going to hit this year’s profits to the tune of around £15m. The Aston Martin share price dipped a couple of percent on the news, which isn’t too bad.

But the stock’s early June gains have reversed, and we’re looking at a 17% fall from February’s high (although a 33% rise year-on-year). It seems the enthusiasm that greeted the arrival of the company’s new management team might be waning. So, does this period of share price weakness signal a buying opportunity? Those who missed the steady rise that kicked in towards the end of 2020 might see it like that. But I’m not so sure.

I have one big difficulty in thinking about Aston Martin. And that’s separating the company we see today from the one that ambitiously came to market in 2018. But that separation needs to be done, because I reckon they’re two very different companies. With hindsight, we can now see that the one that floated amid so much fanfare had its head in the clouds. Ambitions were plentiful, but it was mostly wishful thinking. And after the AML share price lost 90% of its value in the first two years, it looked like the company was set to go bust for the eighth time in its long history as a top marque.

AML share price crash

If the aftermath of the AML flotation did nothing else for my investing strategy, it reminded me of why I don’t buy at IPO. Anyway, the new management looks far more switched on to me. And Lawrence Stroll’s vision for the company seems far more realistic. 

Saying that, it is still hard to put that catastrophic AML share price slide out of my mind. Remember that old saying that past performance is not an indicator of future performance? I think that’s especially relevant here. But though I do place significantly more trust in the abilities of the new management team, I’m still going to wait and see.

Q1 looked reasonable

The biggest uncertainty is financial. And the best we have to go on is the firm’s Q1 trading update. It was in line with expectations, and AML described its transformation progress as excellent. Wholesale volumes rose by 134%, while revenue increased 153% to £224m. That’s good news. But it’s against the first quarter of 2020, which is not a very high bar to beat. Still, Aston Martin did report a positive adjusted EBITDA of £20.7m — but there was an adjusted operating loss of £15.3m. Yet net debt fell, from £956m a year previously, to £723m, which is good.

So will I buy? No, not now, because there’s still far too much uncertainty for me. I still think, however, that the AML share price could look attractive once we see further progress.

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.

Alan Oscroft 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

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »