Could I make big buck with cheap Aston Martin shares?

Aston Martin shares plunged nearly 10% on Thursday morning amid rumours of another capital raise. But, maybe now is a good time to buy?

| More on:
Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.

Image source: Getty Images

Aston Martin (LSE:AML) shares compounded heavy losses on Thursday as rumours spread that the car manufacturer was looking to raise more capital. The stock fell nearly 10% in early morning trading.

So, what’s behind the fall and is Aston Martin right for my portfolio?

What’s behind today’s losses?

Aston Martin is allegedly looking to raise more capital to help fund its operations. According to Autocar, Aston is wanting to significantly strengthen its financial position as it ramps up investment for its next-generation platforms and future electrification strategy.

Autocar reported on Wednesday that the fundraising could involving bringing a significant new investor onboard. Aston Martin are open to offering a position on the company’s board as an inducement. The magazine suggested the investment could be upwards of £200m.

It also claimed that there are two leading contenders for the funding. The first being a Saudi Arabian investment fund. Businessman and executive chairman Lawrence Stroll allegedly has close ties with the country through his F1 team’s deal with Saudi Aramco.

The other investor could be a fund based in the US.

Aston Martin’s funding requirements

Aston Martin shares also fell on Wednesday. The stock is actually down 20% this week. And that compounds losses over the course of the year. It’s down 77% over 12 months — and 96% since its listing!

Stroll has ambitious plans for the iconic car brand. Stroll wants to increase production to 10,000 cars per year by 2024/25, up from 6,600 in 2021. In turn, the chairman wants to achieve £2bn in revenues and £500m in adjusted EBITDA by 2024/25.

But achieving this, and electrifying its range, requires funding.

Aston Martin has £1.2bn of outstanding bonds, bank drafts and loans. This means the company is unlikely to be able to take on more debt.

Could Aston Martin shares soar?

Well, if Stroll’s plans are actualised, the car manufacturer’s shares would soar. But it’s going to be difficult to get Aston back in the black.

Revenue for 2021 was just over £1bn. Stroll’s plan to hit £2bn in revenue by 2024/2025 gives the company just four years to double the firm’s income.

In the most recent quarter, revenue grew 4%. Clearly, the growth rate is going to have to increase significantly. That said, it’s worth noting that growth has been constricted by a dearth of semiconductors in the last year. However, on Thursday, UK car manufacturing posted its first uplift in 10 months.

I’m actually pretty positive on Aston Martin’s growth plans. I definitely think the company is moving in the right direction. Its SUV is selling well and it’s also focusing on improving margins.

Aston appears to be taking a leaf out of Ferrari‘s books — former boss Amedeo Felisa was recently appointed CEO. The Italian brand has some of the best margins in the business.

I already own Aston Martin stock, but I’d buy more at today’s price. Although I see this as a long-term investment. I’m not expecting a turnaround 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 considered so you should 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

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

Using the price-to-earnings metric to find the cheapest UK shares to buy now!

There’s certainly no shortage of value UK shares right now. I'm finding the cheapest stocks for my portfolio using the…

Read more »

Man changing battery on electric bicycle
Investing Articles

Stock market recovery: my top 2 FTSE 100 shares to buy this month!

The UK index might be trading above 7,500, but many FTSE 100 shares still haven't recovered. In fact, plenty trade…

Read more »

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

4 of my best shares to buy for an autumn stock market bounce

Jon Smith explains which are his best shares to buy depending on different scenarios behind a potential market rally.

Read more »

Risk reward ratio / risk management concept
Investing Articles

Is the GSK share price good value after the 13% fall last week?

Jon Smith considers the reason behind the sharp fall in the GSK share price last week, and wonders if now…

Read more »

Young black woman in a wheelchair working online from home
Investing Articles

At under 5p, are Woodbois shares a no-brainer buy now?

I didn't buy Woodbois shares when they were up over 8p. Now they've fallen back, I'm wondering if I'm seeing…

Read more »

Business development to success and FTSE 100 250 350 growth concept.
Investing Articles

Are we about to see a raging bull market for shares?

Investor sentiment looks like it's changing and we could be in the early stages of a bull market for shares…

Read more »

Black father holding daughter in a field of cows
Investing Articles

I’m investing just £5 a day in income stock to aim for £8,000 a year in passive revenue!

Income stocks form the core part of my portfolio, offering me passive income with minimal effort. But I'm reinvesting my…

Read more »

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

3 dividend hero stocks for a monthly passive income

This Fool discusses the investment trusts capable of paying him a lifetime of growing passive income to supplement his portfolio…

Read more »