Lawrence Stroll has been in the news this week, outlining his lofty visions for the future of Aston Martin Lagonda (LSE: AML). As the famous British marque is about to adorn its first Formula 1 car in more than 60 years, I’m pondering what this might all mean for the Aston Martin share price.
The Canadian billionaire made his fortune in the luxury brands business. And now he says he wants to build “the strongest profile of any luxury automotive brand” for Aston Martin. When you’re in a world that includes Ferrari, that’s not a trivial task.
The recent past has most certainly not been glorious. After initial public offering (IPO) in October 2018, the AML share price promptly went on a slide. It had dropped 95% by May 2020. And that makes me think of the seven times Aston Martin has gone bust in its 108-year history.
Aston Martin share price recovering slowly
Since then, Stroll has stepped in with his backing investors and taken over the reins of the company. It’s a slimmed down operation now, and the cash haemorrhage has been reduced to a relative trickle. And the shares have put in something of a recovery. Since that low point, they’ve trebled in value. To put that into perspective, mind, we’re still looking at an 82% fall since the IPO.
I join many investors in thinking that an IPO is a bad time to invest in a company, and Aston Martin could be the poster child for what can go wrong.
Full-year results released on 25 February gave the Aston Martin share price a brief boost on the day, but that quickly fell back.
Results for 2020 were in line with expectations, the new management team appears to be firmly embedded in place and backed by its new investor funding. The DBX model launch seems to have gone well too, with 1,516 sold into the wholesale market by the end of the year. That’s not quite the same as would-be grand prix champions actually driving them on the roads, but I think it is a satisfying sign of progress.
A financial corner turned?
On the financial front, Q4 perhaps saw something of a key point. Adjusted EBITDA turned positive, after revenue growth in the firm’s strongest quarter. But the bigger picture still makes me very uncertain about the AML share price. Total revenue for the year was still down, by 38%. And AML recorded a statutory operating loss of £323m. And net debt stands at £727m.
Looking forward, I do have my concerns about the luxury car market and the growing movement to ban fossil fuel vehicles. I honestly don’t know much about battery-powered supercars. But I do fear that the market will face pressure as we approach the various carbon-based phase-out dates in the coming decade and beyond.
Will Lawrence Stroll be able to turn Aston Martin into the Ferrari of the electric vehicle world? I just see too much uncertainty, coupled with my insufficient expertise, to consider buying.
Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK recommends the following options: long December 2021 $130 calls on Ferrari. 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.