The last time I looked at the Aston Martin (LSE: AML) share price was on 18 May when I noted that it was starting to pick up speed. But I still described it as a “brave buy”. Sadly, I wasn’t brave enough to buy it myself.
I should have done, though. At the time, Aston Martin Lagonda traded at 260p. On Friday, it closed at 338p, some 30% higher. Measured over 12 months, it’s the best performing company on the entire FTSE 250, having grown 110.06%.
Aston Martin’s stock jumped 5.36% on Friday alone, after broker Jefferies lifted its rating from ‘hold’ to ‘buy’ and hiked the price target from 300p to 420p. It said three capital raises in three months have shored up its balance sheet liquidity, and the outlook is “more encouraging than ever”, as the company revamps its product range and targets higher average selling prices.
It’s a far cry from last autumn, when Aston Martin posted yet another dismal set of results, with pre-tax losses over nine months almost tripling from £188.6m to £511.3m, amid delivery shortfalls.
Looking back, that was the start of the recovery, as Canadian billionaire Lawrence Stroll upped his stake in the struggling luxury car maker. By May, Q1 losses had narrowed amid strong sales of sports utility vehicle DBX. Revenue rose 27% to £295.9m, with volumes and selling prices up too.
I decided I’d missed the best part of the Aston Martin share price recovery, and sat on my hands. Is it too late to make good my mistake?
I have a perennial problem with buying growth shares, and I suspect I’m not alone. When they’re in the doldrums, I expect them to fall further, and wait to buy them at a cheaper price. When they’re on the up, I feel like I’ve missed my moment. So when exactly do I buy? Today, maybe?
Time to buy?
Jefferies says that “now feels like a new start” as Aston Martin has debt under control with Chinese carmaker Geely taking a 17% stake. The global economy may be in trouble but this is often a good time to buy luxury goods makers. The super wealthy typically have more immunity to a downturn than the rest of us. And if you can afford to buy a car for £150,000, you’re super wealthy, in my book.
Aston Martin is still losing money, posting an interim pre-tax loss of £142m for the six months to 30 June, but that’s halved in a year. Wholesale volumes grew 10% while revenues jumped to 25% to £667m, with 3,000 vehicles sold.
The shares could enjoy another lift when/if it swings back into profitability, although future returns may already be priced in. The board is targeting £2bn of revenue next year, with EBITDA earnings of £500m. With “continued strong momentum”, it expects to beat these in 2025.
With a market cap of £2.69bn Aston Martin still has some way to go before it zooms into the FTSE 100, but at this rate it could get there. It’s about time I bought the stock. It should be quite a ride.