Investor demand for UK shares is steadily picking up as optimism over the economic recovery grows. The FTSE 100 has just hit new 15-month highs above 7,100 points, for instance, whilst the FTSE 250 has struck fresh record peaks. The Aston Martin Lagonda (LSE: AML) share price has failed to benefit from this pick up in risk appetite though.
Not even an encouraging set of financials this week has bolstered market appetite for the luxury carmaker. Indeed, the Aston Martin share price has continued its steady drop in Friday business and just hit lows not plunged since late January.
Does this provide a dip-buying opportunity for UK share investors like me? Or will the Aston Martin share price continue to fall?
Sales move into the fast lane
Let’s look at Thursday’s first-quarter update to begin with. As I said, it gave grounds for the carmaker to be optimistic following what has been a tough few years since its IPO in October 2018.
Yesterday, James Bond’s favourite carmaker reported a sharp snapback in customer demand. Revenues at the business soared 153% in the first quarter, to £224.4m. This was driven by a 134% year on year improvement in wholesale volumes (that is sales to dealerships). This clocked in at an impressive 1,353 units. Stronger pricing dynamics following the destocking of its GT and Sport models also helped the top line to soar.
As a consequence Aston Martin’s pre-tax loss narrowed significantly in the quarter. This fell to £42.2m from £110.1m a year earlier. What’s more, a combination of cost-cutting and a recent share placing reduced the FTSE 250 firm’s net debt pile to £722.9m from £956.1m in the first three months of 2020.
Demand for Aston Martin’s high-end vehicles was particularly-strong in The Americas and Asia Pacific (and more specifically China). Global sales of the carmaker’s newly-launched DBX sports utility vehicle (SUV) were especially robust, too. Indeed, SUV units of 746 accounted for more than half of all Aston Martin’s car wholesale sales in the first quarter. Additionally, sales of Aston Martin’s Sport model soared 66% year on year to 312 motors.
Here’s what I’m doing about Aston Martin’s share price
This week’s release provides compelling evidence that Aston Martin (and possibly its share price) has turned the corner. Sales are recovering after being gutted following the Covid-19 outbreak. The carmaker’s Project Horizon plan to improve efficiency and supercharge sales (it’s targeting wholesale sales of 10,000 a year by 2024/25) has also started with a bang.
The Aston Martin share price has risen 113% over the past 12 months as investor confidence has improved. But I myself am not tempted to buy just yet. Net debt levels have fallen at the carmaker, but these still sit at uncomfortably high levels. Another heavy wave of Covid-19 infections could sweep away the sales recovery quite swiftly and put debt firmly back into focus. Aston Martin is making great progress, sure. But I’d still rather buy other UK shares at this moment.
Royston Wild 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.