The Aston Martin share price slumped 4% today! Is it a buy?

The Aston Martin share price has fallen by 4%, compounding losses over the course of the year. But should I consider it for my portfolio?

| 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.

Man Glance Down Trading Background

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.

sdf

The Aston Martin (LSE:AML) share price fell in early trading on Wednesday morning. The stock is up 24% over the last month having recovered from a slump induced by Russia’s invasion of Ukraine. However, the long-term trend for this FTSE 250 stock is not positive, down 50% over the past year.

Wednesday’s fall

The Aston Martin share price fell 4% on Wednesday morning as London stocks dropped in early trade. The Gaydon-headquartered firm was one of the biggest fallers on the FTSE 250 along with Moonpig Group and Dr Martens.

The unsteady start to trading came after Federal Reserve governor Lael Brainard said overnight that the US central bank could start reducing its balance sheet as soon as next month. Brainard added that the Fed was prepared to take stronger action on raising interest rates. San Francisco Fed President Mary Daly also echoed these comments.

The comments raised concerns that the Fed could overplay its hand-in reining in inflation. This could potentially tip the US economy into a recession.

Should I buy the dip?

The Aston Martin flotation must be one of the worst in recent years, falling some 90% since its offering in late 2018. The stock is now trading at 934p a share, hugely down on this time last year and only a fraction of where it was three years ago.

In February, the company posted fairly positive 2021 results, with a narrowing of its full-year losses as sales surged. Pre-tax losses reduced to £213.8m from £466m the year before, when the company suffered during the height of the pandemic.

The turnaround was driven by a sharp increase in revenue, up 79% to £1,095m. The jump was largely attributed to substantial volume growth, driven by customer demand, and strong pricing dynamics. Sales were up 12% on a two-year basis.

The supercar manufacturer insisted that this was achieved despite a difficult operating environment. It added that the year concluded with dealer stock at optimum levels.

The company has strong growth objectives too. In 2021, it shipped 6,600 cars to its dealers. But by 2024/25 executive chairman Lawrence Stroll hopes to increase this number to 10,000 cars per year.

Aston Martin said the results showed it is on its way to achieving its 2024/25 goals, including £2bn in revenues and £500m in adjusted EBITDA.

While the objectives look great, the company’s debt is one issue. The group reported net debt of £892m in 2021. Coupled with high interest rates on its loans, this could really impact its capacity to turn a profit.

I’m a huge fan of the brand and do have a limited number of shares in the company, but I don’t intend to buy more as I’m concerned about its capacity to hit its goals. I don’t see the share price exploding any time soon.

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.

James Fox owns shares in Aston Martin. 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

Close-up image depicting a woman in her 70s taking British bank notes from her colourful leather wallet.
Investing Articles

£20,000 in savings? Here’s how to target £841 of passive income each month

Passive income plans don't need to be complicated. Our writer explains how someone could target a sizeable second income buying…

Read more »

Happy couple showing relief at news
Investing Articles

3 passive income strategies I like to try to double the State Pension with just £100 a month

Investing consistently, with diligence, and patience can lead to an impressive stock market income that puts the State Pension to…

Read more »

ISA Individual Savings Account
Investing Articles

£20,000 invested in a Stocks and Shares ISA 10 years ago could now be worth…

Stocks and Shares ISA investors have earned tremendous returns in the last decade, but just how much money has been…

Read more »

British coins and bank notes scattered on a surface
Investing Articles

An 11.5% yield?! Here’s the dividend forecast for a hot income stock

This steadily recovering income stock has the highest dividend yield in the FTSE 250, which looks like it’s here to…

Read more »

Dominos delivery man on skateboard holding pizza boxes
Investing Articles

At 10p, is this penny stock a screaming buy?

This penny stock's growing rapidly, is debt-free, and is about to almost double its store footprint! Could it be on…

Read more »

Mature people enjoying time together during road trip
Investing Articles

How to take an empty ISA and transform it into a potential £50,000 second income

A key requirement of reaching financial freedom is earning a second income. And the stock market provides a way to…

Read more »

Man hanging in the balance over a log at seaside in Scotland
Investing Articles

How much do you need to invest in the stock market to quit work and live off dividends?

Quitting a nine-to-five job and living off dividends from the stock market sounds like a pie-in-the-sky idea to many. But…

Read more »

UK financial background: share prices and stock graph overlaid on an image of the Union Jack
Investing Articles

Prediction: this UK share could outperform Rolls-Royce between now and 2030!

Rolls-Royce has been on a phenomenal run, but over the next five years, another aerospace business could potentially deliver far…

Read more »