The Motley Fool

Will the Aston Martin share price recover in 2021?

Image source: Aston Martin

The Aston Martin (LSE:AML) share price has been on a downward trajectory ever since its IPO in 2018. Even before the pandemic hit, the business was haemorrhaging cash and reporting increasing losses with each passing year.

But recently, its share price has begun recovering. Is Aston Martin finally on track to becoming a great business? And should I be adding it to my portfolio? Let’s take a look.

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...

A new chapter for Aston Martin

In early 2020, the company received a £500m rescue package from Canadian billionaire Lawrence Stroll, who now sits as executive chairman. The company is undergoing substantial restructuring under his guidance. And so far, things appear to be going well given the Aston Martin share price is up almost 75% since September last year.

As part of this restructuring plan, Tobias Moers was appointed as the new CEO. He has over 25 years of experience within the automotive industry and had been chairman and CEO of Mercedes since 2013.

The company is switching its strategy. It’s bringing new vehicle development in-house while using Mercedes as a key producer and supplier of bespoke engine parts. I think it’s fair to say that Tobias’s existing relationship with Mercedes certainly helped form this new partnership.

The company also launched a brand new model – the Aston Martin DBX – which has a lofty price tag of £158,000. Despite the premium cost, the car appears to be very popular, with more than 1,200 sold in the last quarter of 2020.

The Aston Martin share price is rising

Why did the Aston Martin share price rise?

The business recently released its final results for last year, and at first glance, they were pretty dreadful. Net losses increased by nearly four times to £466m. The number of cars sold to dealerships and wholesalers dropped by 32% and 42%, respectively. And to top it all off, £98m of R&D technology was written off as part of its new strategy.

Needless to say, this does not exactly indicate a thriving business. So why did the share price go up?

While the overall results were poor, some promising trends emerged. Thanks to the new DBX model’s popularity, total revenue actually increased by 3%, even though the total number of cars sold dropped by around a third.

Subsequently, management has forecast that 6,000 cars will be sold in 2021. Half of which will be the new DBX model. This is actually 20% lower than the previous year. But the premium-price of the DBX means that if the company hits this target, it will become profitable again for the first time in five years.

The bottom line

The preliminary results of the new strategy indicate to me that Aston Martin is heading in the right direction. But there are still many challenges ahead. The most prominent of which is its level of debt. The firm has over £1.1bn of loans to repay. And so, even if the firm achieves profitability, it may take some time for the balance sheet to become healthy again.

That means it could take time for the share price to fully recover, even if it rises further this year. 

Therefore, I won’t be adding Aston Martin to my portfolio today, but I’ll definitely be keeping an eye on how it performs over the next few quarters.

However, there is a stock that I believe is set to explode in 2021.

A Top Share with Enormous Growth Potential

Savvy investors like you won’t want to miss out on this timely opportunity…

Here’s your chance to discover exactly what has got our Motley Fool UK analyst all fired up about this ‘pure-play’ online business (yes, despite the pandemic!).

Not only does this company enjoy a dominant market-leading position…

But its capital-light, highly scalable business model has previously helped it deliver consistently high sales, astounding near-70% margins, and rising shareholder returns … in fact, in 2019 it returned a whopping £150m+ to shareholders in dividends and buybacks!

And here’s the really exciting part…

While COVID-19 may have thrown the company a curveball, management have acted swiftly to ensure this business is as well placed as it can be to ride out the current period of uncertainty… in fact, our analyst believes it should come roaring back to life, just as soon as normal economic activity resumes.

That’s why we think now could be the perfect time for you to start building your own stake in this exceptional business – especially given the shares look to be trading on a fairly undemanding valuation for the year to March 2021.

Click here to claim your copy of this special report now — and we’ll tell you the name of this Top Growth Share… free of charge!

Zaven Boyrazian does not own shares 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.