I’ve been keeping a close eye on the Aston Martin Lagonda (LSE:AML) share price for a while now. I love the brand and the cars created over the years. But that’s my heart and I can’t get my head to justify an investment. Over the past month, the share price has moved 9.5% lower, compounding the 67% it’s lost over the past year. So why is it still falling?
A lower Aston share price after a big loss
Firstly, let’s talk through the full-year 2020 results that were released in late February. Obviously, with the Aston Martin share price down heavily, it’s logical to assume they weren’t great. Revenue came in at £611.8m, 38% lower than 2019. When I add in the costs of operations, it meant the loss before tax was £466m. This is much worse than 2019, even though the previous year also yielded a loss of £119.6m.
I was expecting Aston Martin to record a loss, but £466m is higher than I anticipated. After all, Q4 wasn’t an overly bad quarter, with revenue basically the same as Q4 last year. I can see why some investors sold out as the large loss for the year doesn’t bode well for the business as we look into 2021.
One positive I can take from the report was the strong demand for the new SUV, the DBX. This is a new market sector that Aston is targeting, and so far, the order book looks healthy. But this is still a small proportion of overall sales for the brand as we stand.
Looking at the details
Another reason the Aston Martin share price fell was the outlook that was given. Although the CEO spoke of “era-defining cars” coming and excitement around the return of the Formula 1 team, that couldn’t disguise the other details. For example, interest paid on debt amounted to £82.3m. Even with some refinancing of £1.2bn of debt, it just kicks the can down the road slightly. As debt mounts, so do interest payments. I think this could really hinder the company over the next few years.
Investors obviously digested other parts of the report and outlook, with the overall opinion being negative. If it had been positive, then the Aston Martin share price might have finished the week in positive territory. Bad results can sometimes be overlooked by the market if the future seems much more positive.
One element for the years ahead that counterbalances the bad news is the move towards electric cars. I think electric cars are the future. Recent news that Aston Martin is gearing up to make a fully-electric car in the UK from 2025 is great. This could be something that gives a longer-term boost to the share price if this timeframe is kept to.
But even though I love the brand, I won’t be buying any time soon. The Aston Martin share price will bottom out somewhere, but I’m not sure we’ve reached the bottom yet.
jonathansmith1 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.