The Aston Martin (LSE:AML) share price fell again on Monday morning. The stock has to be one of the worst flotations in recent years with the share price down 95% over the past three years.
What’s behind today’s dip?
The Aston Martin share price fell by 6% on Monday morning and it has nothing to do with the F1 team’s dire performance at the Australian Grand Prix. The fall came as Goldman Sachs cut the group’s price target to ‘neutral’. The Gaydon-headquartered firm was the biggest faller on the FTSE 250. Goldman Sachs has set a new price target of 1,089p that is still considerably more than the 806p at the time of writing.
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The news also reflected concerns that Covid-induced lockdowns in China would lower demand for Aston’s cars in the highly lucrative market.
The downgrade has been compounded by poor UK GDP data. UK economic growth slowed more than expected in February as a fall in car production undermined a sharp recovery in holiday bookings. The Office for National Statistics (ONS) said gross domestic product rose by only 0.1%, down from 0.8% in January.
The ONS data suggested that UK car manufacturers were still struggling to overcome supply chain issues, especially noting challenges around semiconductors.
Aston Martin performance data
Aston Martin published fairly positive 2021 results in February. The company successfully narrowed full-year losses, with pre-tax losses reducing to £213.8m from £466m the year before. While the firm had experienced less pandemic-induced disruption, a components shortage hampered production.
Improved performance in 2021 was driven by a sharp increase in revenue. Total revenue jumped 79% to £1,095m. Sales on a two-year basis were up 12%. The group attributed the growth to stronger pricing dynamics and increased demand for their range of supercars and the new SUV.
In 2021, Aston shipped some 6,600 cars to its dealers. It added that the year concluded with dealer stock at optimum levels.
The Gaydon-headquartered firm claimed the results highlighted that it is well on its way to achieving its 2024-25 goals. Canadian executive chairman Lawrence Stroll hopes to increase car sales to 10,000 units per year within the next three years. The goal includes reaching £2bn in revenues and £500m in adjusted EBITDA.
While I’m confident in the brand appeal and Stroll’s capacity to translate demand into sales, I’m concerned about debt. The group reported net debt of £892m in 2021. The firm will need to turnaround its recent performance in order to avoid this debt becoming unmanageable.
Another concern is the impact of Chinese lockdowns on demand and the firm’s decision to stop selling to Russia.
As a huge fan of the Aston Martin brand, I do own a limited number of shares. However, I don’t intend to buy more any time soon despite the price falling.