How much worse can it get for the Aston Martin Lagonda (LSE: AML) share price? The James Bond car maker is down another 6% this morning, after its first-quarter results showed losses growing due to coronavirus. This follows a drop of 8% yesterday, following a downgrade by analyst Peel Hunt.
It would be fine if Covid-19 was mostly to blame for its woes, but it isn’t. The Aston Martin share price has fallen faster than a Bond villain out of a helicopter since floating 18 months ago. Its original £4.33bn market-cap has plunged £542m, a drop of almost 90%.
Investors who got behind the flotation have endured a hellish ride. We love a contrarian bargain on the Fool, but this is now a leap of faith.
This stock keeps falling
Covid-19 was the last thing the iconic luxury car brand needed. The Aston Martin share price traded at 160p as recently as January. Today, you can buy it for around 35p.
This morning, the group reported a first quarter pre-tax loss of £118.9m, almost seven times higher than last year’s £17.3m loss. Revenue fell 60% to £78.6m, amid falling dealer demand and lower average selling prices. Total wholesale volumes fell 45% to 578 units, with none at all in China in January and February.
Canadian Formula 1 billionaire Lawrence Stroll, now executive chairman, took a bullish approach to these miserable numbers. He hailed the reduction in dealer inventories, a successful £536m capital raise, and the launch of its delayed DBX sports utility model. DBX “remains on track for deliveries in the summer and has a strong order book behind it extending into 2021,” he said.
Aston Martin share price sinks
Aston Martin has a pre-eminent brand, and is now looking to develop its range of mid-engined cars, as well as refreshing its core sports car models. This may not be the end of the fundraising though, as it may have to research refinancing options to increase liquidity.
Naturally, investors should approach with caution, even given today’s low, low Aston Martin share price. Demand for luxury cars may enjoy a V-shaped recovery once the pandemic is over, as many wealthy buyers will emerge financially unscathed. If the latest James Bond film is released in the autumn, that could give it another boost.
It would be a brave person to recommend people buy into the stock today, and I’m no hero. The company was already in severe difficulties before the pandemic. Future funding could be harder to come by. Stronger companies could go to the wall in the months ahead. Sentiment will be in short supply. Remember, this is a company that’s gone bankrupt seven times in its history.
The automotive industry is facing radical transformation as climate fears grow. But Aston Martin won’t produce its first electric car until 2025. It would need a 007 scriptwriter to get the company out of today’s tight spot.
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK 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.