Luxury goods are merely a pipe dream for most people. Cars are my luxury desire. Think Bond, James Bond.
I am, of course, referring to Aston Martin Lagonda (LSE:AML). Unfortunately, it has been a tough couple of years for the British luxury car manufacturer.
Founded in 1913, it has become famously associated with the James Bond film series since its debut in Goldfinger in 1964. Since 1982 it has held a Royal Warrant as purveyor of motorcars to the Prince of Wales. With over 150 dealerships spanning across six continents it is truly a global automobile brand.
When you target a company, especially such a prestigious and well-known brand, you would hope to achieve a favourable early outcome. Unfortunately, if you had decided to take a punt on Aston Martin shares, you would not have seen such results occur. As a matter of fact, the decline has been alarming, although not surprising given recent news.
The IPO began in September 2018, with a guide share price of between 1,750p and 2,250p per share. A few days later, this was reviewed and narrowed to between 1,850p and 2,050p per share. The price opened at 1,900p and dipped as low as 1,775p on day one of trading.
To provide some context, the share price currently sits at around 330p per share which is an astounding downturn of approximately 80%.
CEO Andy Palmer remained upbeat and attempted to instil confidence after the initial trading, commenting, “We’ve taken 105 years to get to an IPO. I don’t think we’ll worry about what the shares are doing initially. We’ll always look over the longer term.”
Results and struggles
It announced full-year results on Thursday, crashing £104m into the red in 2019, a 53% increase year on year and equal to a loss of nearly £18,000 on every car sold during the year. Revenues slumped by 9%, to £997m, while debt rose to £876m, up almost 56% from the previous year.
The announcement sent shares tumbling 14% to hit a record low of 328p. That left the company worth less than a fifth of its value at the time of its IPO. The 2019 sales forecast of 7,300 cars turns out to have been ambitious, as it actually only achieved 5,862.
To add to its woes, the coronavirus is making life more difficult. There is sure to be an impact on supply chain and sales. The bigger worry for me is the effect of the virus on the release of the new make-or-break SUV, the DBX.
Chinese sales rose by 28% during 2019 – while sales in the UK and Europe fell – indicating that the quarantine conditions in place in many parts of China could weigh heavily on revenues.
What happens now?
From an Aston Martin point of view I do not see a viable plan or strategy which makes sense aside from continuing releasing new cars in the hope of doing well. A cash injection would be useful but that is easier said than done at this point.
In my opinion this has to be one of the worse stock market flotations in history but more immediately I would steer clear of the shares. I would not even view the cheap price as an opportunity.
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Jabran Khan 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.