Making a definitive call to buy shares in Aston Martin Lagonda (LSE:AML) over the past year has been tricky. Since the start of 2021, it has anchored around the 2,000p level. It has traded up close to 2,300p and down close to 1,700p in the interim, but without much conviction either way. I think the Aston Martin share price is waiting for a catalyst to make a break higher. Here are three reasons that could help light a spark soon.
Bouncing back to profit
Its recent half-year results gave some optimism for the brand going forward. At the top level, revenue increased to £499m versus the dreadful H1 2020 figure of £146m. This ultimately helped the company swing from an adjusted EBITDA loss of £89m last period to a profit of £49m.
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Clearly, comparing the figures to H1 2020 does allow a sense of overachievement to be seen. Although I take the comparison with a pinch of salt, the numbers are still impressive. The breakthrough in delivering a profitable half-year is something that can’t be underestimated.
The clear driver was the increase in wholesale units. Simply put, Aston Martin managed to shift considerably more vehicles during the first six months of 2021. This is perhaps a reason to get excited about the Aston Martin share price going forward. If customer demand for luxury cars is bouncing back, it bodes well for the next few years. After all, if we’re seeing this demand when the UK and global economies are still in a recovery phase, how high could it be during a boom period?
A risk here is that the fate of the Aston Martin share price could be closely with the state of the economies and pandemic in key markets. If we see a tough winter with some restrictions in place, growth could slow as customer spending slows. This could hurt sales for Aston Martin.
A second reason I’m optimistic about the Aston Martin share price is the strategic vision going forward. The company has a much better vision of where it’s going (in my opinion) than it had a couple of years ago.
For example, it has a roadmap of the new vehicles and the target market for each. It has plans to focus on a plug-in supercar, an enhanced SUV and more race-track-linked options. Each of these widens the appeal of cars to different types of potential buyers. The larger the market it can appeal to, the higher the sales and revenue that can be generated.
I do note here though that the brand will always be focused on the niche segment of car buyer — people who can actually afford an Aston Martin. This is both a risk and benefit. In a competitive luxury market, it needs to convince the wealthy that its products are preferable to a Ferrari, Bentley or Porsche. But at least its core customer isn’t worried about money.
Optimism due for the Aston Martin share price?
Returning demand and the clear strategy give me reasons for optimism. If the company gets traction with either point then I think the share price could break above 2,000p and beyond. I’m not ready to buy the shares now, but if I start to see the above materialise, then I would consider buying in the near future.