Following the release of half year results this morning (24 July), the Aston Martin (LSE:AML) share price has popped 11% higher in early trading. Unfortunately, the FTSE 250 stock’s still down 52% over the past year. But events like this can prove to be the catalyst for a longer-term move higher. Here’s my take on where we go from here.
The results lowdown
Let’s first run over why the price spiked following the results. On the face of it, it might not seem justified. The business saw revenue fall by 11% in H1 2024 versus the same period a year back. This ultimately filtered down to a loss before tax of £216.7m, higher than the £142.2m loss from H1 2023.
On the flipside, the numbers were actually better than analysts had been forecasting. So although it might seem a little odd, the fact that the loss wasn’t as large as expected has been taken as a positive sign for the share price.
Fewer cars at a higher price
One of the big themes I’ve noticed with Aston Martin over the past year is the push to increase the average sales price (ASP) of the models. For example, in H1, the ASP was £274k, up 29% from the H1 2023 figure of £212k.
Yet revenue was down 11%, as I’ve already mentioned. So while the business is selling cars for a higher price (which looks good) it’s ultimately selling fewer of them. Higher prices are good for margins. But if it sold the same volume, then revenue would be up 29%, given the price increase.
This does worry me, as Aston Martin can’t dig itself out of the hole simply by putting up the price of the cars. Fundamentally, if demand from clients isn’t there, this won’t make a difference in the long run.
Boosting credit facilities
Aston Martin has a very strong brand image and luxury reputation. It’s true that it makes quality vehicles that perform very well. Yet certainly for the next couple of years, it needs to focus on being able to keep operating.
As it has been posting full year losses for some time, it needs to ensure it has enough cash flow to keep going. To this end, the half year report noted that “earlier this year we successfully completed our planned refinancing, securing improved five-year terms…and enhancing our liquidity”.
This is reassuring to investors, and is likely another reason why the stock jumped today. Debt has increased since 2023, so the access to loans and debt facilities should ensure that it doesn’t run out of money anytime soon.
Still in first gear
Despite the boost to the share price today, I don’t see any material change that gets me excited enough to buy the stock. Until losses start to shrink and real demand starts to improve, I think I can find much better investing opportunities elsewhere.
