Any FTSE company that has experienced a multi-year share price fall needs to be treated very carefully. There’s something wrong at work, but it doesn’t mean that it’ll stay that way forever. Here’s a company that has garnered significant publicity over the past couple of years, and now it may be facing its worst challenges.
A falling knife
I’m talking about Aston Martin Lagonda (LSE:AML). The stock has declined 47% over the past year, reaching an all-time low in Q2. The trend of moving lower has been happening for several reasons.
Despite launching new models, the company has faced sluggish demand in key markets, particularly in the US and China, which has weighed on revenue. Rising raw materials and production costs have also squeezed margins, while high debt levels have kept investor concerns elevated. Broader macroeconomic headwinds, including slowing luxury spending and potential interest rate pressures, have further dampened sentiment.
Additionally, investors have questioned whether Aston Martin can sustainably scale production and profitability in a competitive high-end automotive market, contributing to sustained pressure on the share price.
All of this has been accurately reflected in the share price movement lower. So the question now turns to asking how low it could go before something changes?
The future trajectory
Recent developments suggest potential reasons for cautious optimism. Under the leadership of relatively new CEO Adrian Hallmark, Aston Martin is implementing cost-cutting measures and operational improvements aimed at achieving profitability. The company has also secured additional funding to support its turnaround efforts. To help this out, it’s selling its minority stake in the Formula 1 team, which is expected to raise over £100m in net proceeds.
The latest half-year report also spoke about getting to a position where they “give customers even greater choice across our core range.” It’s true that they now have an SUV, coupe and convertible offerings, meaning that it can appeal to more clients going forward. This could act to boost revenue in the coming year.
Of course, challenges remain. I’m not going to claim that buying the stock now could result in a huge appreciation in just the coming few months. But the strategic actions being taken could pave the way for a more stable financial future.
The bottom line
I believe Aston Martin shares are unlikely to continue falling at the same pace in the future. It simply can’t happen, unless the company goes bust. After all, it has assets on the balance sheet that mean the company has some value. I do believe it’s nearing a bottom.
However, I don’t see an immediate reason to justify buying right now. Therefore, I’m putting it on my watchlist, as once some positive noises around the transformation start to come through, it’s a stock I’ll think of buying.
