No FTSE 250 share has the cachet of Aston Martin Lagonda (LSE: AML), but none has fared worse over the last year. The James Bond car maker is the poorest performer on the entire index, crashing 50.7%. Cachet isn’t everything.
Aston Martin has a world-class brand and makes world-class sports cars, but its share price is a bit of a banger. Over five years, it’s down 97.64%, having lurched from one crisis to another. Yet hope springs eternal and the stock’s up 10.88% over the last month.
Is this a buying opportunity or yet another false dawn?
Full-year 2023 results weren’t as grim as I expected. Revenues grew 18% to £1.633bn with a record average selling price of £188,000. Gross margins accelerated by 650bps to 39.1%, within a whisker of hitting its long-term target of 40%.
Recovery play (again)
Yet under the bonnet there were disappointments, with underlying cash profit margins of 18.7% coming in below the expected 20%. Inflation didn’t help, pushing up costs. Aston Martin continues to lose money, year after year. However, key metrics are pointing the right way, as my simple table shows.
| 2019 | 2020 | 2021 | 2022 | 2023 | |
| Revenue | £980.5m | £611.8m | £1.095bn | £1.382bn | £1.633bn |
| Pre-tax profit | -£119.6m | -£466m | -£213.8m | -£495m | -£239.8m |
| EPS | -473.13p | -137.11p | -70.89p | -114.10p | -21.40p |
Executive chairman Lawrence Stroll has made it clear that Aston Martin’s “iconic global brand” is “critical” to its long-term success in the luxury market. It’s probably the one thing that has kept it afloat during a turbulent century, that saw it survive seven bankruptcies.
It clearly makes sense to drive the brand as far upmarket as it can go. As FTSE 100 luxury clothing retailer Burberry Group has discovered to its cost, mere aspiration isn’t enough these days. But the marketing spend weighs hard on margins.
Aston Martin made a disappointing start to 2024, with revenues down 10% and wholesale volumes falling 26%. It puts a positive spin on that, saying the launch of four new models should deliver “significant growth” in the second half, allowing it to retain full-year earnings and profitability guidance. It still expects to hit that 40% margins target.
Cut-price stock
Yet it could have done without that setback, as broker Jefferies pointed out, noting the group “continues to test investor patience”.
Jefferies cut its target price from 275p to 250p, but that’s still well above today’s 159p. Cut through the headline numbers and there are signs of hope. Much now depends on what Stroll calls this year’s “immense product transformation”.
Aston Martin does appear to have a brighter future, but it needs to ramp up production, and recent figures suggest it may struggle to do that.
Specials volumes are promising, especially if they’re funded by customers paying an advance deposit, which helps control working capital. Beyond that, Aston Martin still faces the long-term challenge of shifting into electric, or getting left behind.
If there was ever a time to buy Aston Martin shares, this looks like it. The only question is whether I’m brave enough to do so, as it’s still so risky. I won’t know for sure until I click ‘buy’.
