Aston Martin shares just jumped 10%! Should I buy?

Aston Martin shares gained as much as 10% on Wednesday following a trading update and a new CEO announcement.

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Aston Martin (LSE:AML) shares jumped on Wednesday morning. The shares were up 10% at one point, being the best performer on the FTSE 250. The gains followed a trading update in which the UK-based luxury car maker reported a rise in adjusted core earnings and the appointment of a new CEO.

Trading update

Aston Martin reported a first-quarter performance in line with expectations. The results showed growth in revenue on strong pricing but a widening of losses due higher expenses.

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Revenue increased 4% to £233m driven by a rise in average selling prices and the delivery of the Valkyrie model during the period. The firm noted that demand continued to run ahead of supply, adding that the GT/Sports models were sold out for the year. Unprecedented demand also saw all 333 V12 Vantages sold out by launch in March.

Adjusted EBITDA increased by 18% to £24.4m for the three months to March 31. But losses before tax widened to £111m from £42.2m due to ballooning operating expenses.

The Gaydon-headquartered firm also warned that the global operating environment remained uncertain due to the war in Ukraine and ongoing global Covid-19 lockdowns. It specifically noted lockdowns in China that will continue to impact supply chains and and raw materials costs.

A new CEO

On Wednesday, Aston Martin also announced the appointment of former Ferrari boss Amedeo Felisa as chief executive. Felisa’s appointment follows the departure of Tobias Moers “by mutual agreement” with immediate effect after two years with the firm. A story in The Financial Times had claimed that Moers had caused friction at Aston Martin with his management style.

Felisa was CEO of Ferrari from 2008 and 2016 so has experience in leading a luxury car brand, and notably one that has performed better than Aston Martin in recent years. He joined the firm’s board as a non-executive director last summer so has an extensive knowledge of the brand.

Controlling shareholder and chair Lawrence Stroll noted that Felisa had “an excellent track record and previous experience of leading a major ultra-luxury car manufacturer. His technical acumen and charisma will be inspirational for the entire company.”

As an Aston Martin shareholder already, I’m actually quite excited by the appointment. While I prefer the British brand in terms of its vehicles, Ferrari is a much more profitable company and I’d hope the new appointment will see Aston move towards becoming a sustainable and profitable firm. Ferrari has staggering margins and it’d be great to see Aston benefit from some Ferrari knowhow.

Aston Martin has also hired former Ferrari expert Roberto Fedeli as chief technical officer.

Should I buy more?

Actually, the new appointment has got me quite excited. Ferrari is the model that Aston Martin needs to follow and I think the appointment should take the firm in the right direction. There are obviously still big issues, including debt, and possibly the impact of economic slowdowns on growth. Higher interest rates may also hamper the firm’s capacity to deliver profits any time soon.

But I do think the brand has already made improvements under Stroll and the Felisa appointment has certainly made me more upbeat about the firm’s direction. Having said that, I’m going to wait for more performance data before I buy more stock.

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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.

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 considered, so you should consider taking independent financial advice.

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