The Motley Fool

The Aston Martin share price is up 80% since May. Read this before you buy

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Man making notes on graphs and charts
Image source: Getty Images.

Aston Martin Lagonda (LSE: AML) has been one of the worst IPO investments I can remember. Since flotation, the shares have lost around 90% of their value. Many stocks are suffering as a result of the Covid-19 pandemic, and we have no exception here. The Aston Martin share price is down 70% in 2020. That fall, though, is only a small portion of the full slump.

Rescuer Lawrence Stroll has now stepped in and invested a lot of his own cash. And Tobias Moers has taken over as chief executive. Mr Moers joined from Mercedes-AMG, and he’s very much a heavyweight in the business.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

The new management has made a big effort to streamline the company. The board has pulled back from grand early ambitions, and has set more modest sales targets. Expenditure has been cut, and jobs have sadly been lost. Hopefully, the result will be a stemming of the firm’s haemorrhaging of cash.

Aston Martin share price rising

The market has reacted favourably, and the Aston Martin share price’s headlong slump has been arrested. Even better, since a low in May 2020, the shares are now up 80%. Investors don’t get many 80% profits in such a short timescale, so those who managed to get in at the bottom have done well.

But what now? The big question is over Aston Martin’s long-term future. I think that’s as uncertain as ever.

Fallen shares, worth only a small fraction of their historic levels, can be very enticing. It’s so easy to think along the lines of what goes down must come up, even if perhaps not consciously. When will it get back to what I paid for it? When will it recover from its fall? Tell me you haven’t wondered along those lines about the Aston Martin share price.

My recovery rule

I like a good recovery opportunity as much as the next investor. But in my time I’ve just seen too many crashed stocks go all the way to the wall. So these days, I prefer to hold off until I see what there is at the end of the tunnel. Light’s not so good if it’s the light of an oncoming train.

That means I want to see the risk receding and see actual evidence of profitability. I’ll miss the lowest price like that, for sure. But I don’t care about that, I care more about reducing my risk. For me, that takes the Aston Martin share price off the table right now.

Burning cash

The company is not expected to make a profit any time soon. Forecasts suggest pre-tax losses of hundreds of millions this year and next. The firm had £359m in cash on its books at 30 June, after its big equity issue. But net debt stood at £751m. I can’t see Aston Martin making it to profit without needing to raise more cash first.

Aston Martin has gone bust seven times in its history. I see a very real chance of an eighth, and I don’t want to be left holding any worthless shares if it happens.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic…

And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.

Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…

You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.

That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

Click here to claim your free copy of this special investing report now!

Alan Oscroft 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.