The Aston Martin Lagonda (LSE: AML) share price has been on a steady rise since last week following the news of a large investment in the company from the Saudi Public Investment Fund (PIF).

The stock has posted a far from impressive performance since its IPO back in 2018. And in 2022 alone, its value has been slashed by over £1bn. However, could the jump we’ve seen kickstart its road to recovery? Or should I be steering clear?

Saudi-backed support

It’s no secret that the business has been in a delicate financial state of late. According to its Q1 results, it currently sits on a pile of debt just shy of £1bn. And with the firm struggling to generate cash, it has fallen behind competitors as it lacked the ability to keep up.

But with backing from the PIF, Aston Martin’s fortunes may be about to change. The fund plans to invest over £650m into the business, making it the second largest shareholder, after Yew Tree, through a £78m purchase of shares and a £575m rights issue.

While a large chunk of the investment is being used to eradicate some of the firm’s debt, it will also provide a boost by giving it a “substantial liquidity cushion to underpin and accelerate future capital expenditure.”

Many spectators have been concerned over the firm’s financial health. However, this news seems to have offset this worry as the Aston Martin share price has spiked since last Friday.

What I’m doing

So, does this mean I should be buying Aston Martin shares?

Well, the fact that multiple investors were after a chunk of the firm, including Chinese carmaker Geely, draws me to the business. This may mean these companies see it as cheap right now. This is a positive sign.

The manufacturer is also moving with the times through its development of electric models. The business expects the first of these to be ready by 2025. And it’s currently scouting potential partnerships after holding talks with the likes of Mercedes-Benz.

While this may provide the firm with a much-needed boost, compared to competitors, Aston Martin is far behind. Main rival Porsche already offers multiple electric models, while Ferrari expects full-electric cars to make up 40% of sales by the end of the decade.

What I think could help Aston Martin is its strong brand recognition. There’s no doubt it’s an iconic name. And with this comes a competitive advantage. It expects to sell 10,000 vehicles by 2025, a major increase from the 6,178 it sold last year. This could nudge the share price up.

However, while I see signs of optimism for the stock, I won’t be buying its shares right now. Its heavy debt burden is a turn-off for me. I deem it a too-risky investment. Therefore, I plan to keep it on my watchlist and track its movements in the months ahead.

The post The Aston Martin share price has jumped! Should I be buying? appeared first on The Motley Fool UK.

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• These FTSE 250 stocks are tipped to rise 46% (or more) in the next year!
• Down 95%, what might it take for the Aston Martin share price to rise 2,000%?
• My personal warning for anyone tempted by the plunging Aston Martin share price

Charlie Keough 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.

“Significantly improved performance”

Today’s interim results do seem to suggest the luxury car-maker has turned a corner. Although in line with expectations, AML announced a “significantly improved performance” over the first half of 2021.

A total of 2,901 vehicles were sold, a rise of 224% on that achieved over the same period in 2020. Over half of these were DBXs – the company’s first foray into the SUV market.

Naturally, this improved AML’s top line. Half-year revenue more than trebled to just shy of £499m. As you might expect, the jump was particularly noticeable during the second quarter. After all, this period coincided with the first UK lockdown last year. Although still reporting a pre-tax loss of £90.7m, this was clearly far better than the £227m hit AML endured last year. 

There’s an indication this momentum will continue, which should be good news for the Aston Martin share price. Near-term demand for the firm’s current models looks to be solid and within forecasts. Indeed, the carmaker made very few changes to its full-year guidance with 6,000 vehicles expected to be sold. A target of 10,000 sales (and revenue of around £2bn) has been set for 2024/25.  

Still in the pits?

I reckon today’s numbers are as good as holders could’ve expected. News that manufacturing hasn’t been impacted by global chip shortages, at least so far, is encouraging. Recent highly-experienced additions to AML’s board, such as former Ferrari CEO Amedeo Felisa, further support the bull case.

Then again, it’s also important to put today’s results in context. Many businesses are reporting jumps in revenue as normality slowly returns. So, yes, AML’s figures are fine. However, I don’t think they can be regarded as exceptional.

At nearly £800m, the company’s level of net debt pile also remains an issue for me. Taking on debt isn’t always a bad thing but a robust balance sheet does allow a business to remain resilient when the tough times come. And whether it’s down to Covid-19 or another ‘known unknown’, you can be sure the market will be rattled by something sooner or later. 

Better opportunities

My dislike of AML wasn’t just due to the ludicrous valuation slapped on the company a few years ago. It was also due to vehicle manufacturers having a history of being pretty poor investments.

To paraphrase UK fund manager Terry Smith, things made from durable materials like metal tends to generate a lacklustre return because people tend not to bother replacing them during tough economic times. Whether this applies to a premium brand like AML is another thing, of course.

Based on the market reaction so far this morning, I suspect we may have already seen a bottoming in the Aston Martin share price. Even so, I can think of a huge number of other growth-focused, financially-sound companies I’d rather invest in right now.

And when it comes to buying a firm specialising in things that the majority of us can’t afford, there’s a far better option in the FTSE 100, in my view.

The post The Aston Martin share price has nearly doubled. Should I buy now? appeared first on The Motley Fool UK.

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• These FTSE 250 stocks are tipped to rise 46% (or more) in the next year!
• Down 95%, what might it take for the Aston Martin share price to rise 2,000%?
• My personal warning for anyone tempted by the plunging Aston Martin share price

Paul Summers 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.

But recently, the share price has been back on the rise. And over the last 12 months, it’s up by more than 180%! Is the business making a comeback? Let’s take a look.

The rising Aston Martin share price

I’ve previously explored why the Aston Martin share price started climbing last year. But as a reminder, earlier in 2020, the company received a £500m rescue package from Canadian billionaire Lawrence Stroll. After this, the firm began a major restructuring that saw the introduction of Tobias Moers as the new CEO.

Since the last time I looked at it, Aston Martin has published its first-quarter results for 2021, and they were actually quite promising. Total revenue for the quarter surged by 153% compared to a year ago, reaching £224.4m. This growth was almost entirely organic and mainly stemmed from the immense popularity of the newly launched DBX model. Despite having a lofty price tag of £158,000, Aston Martin sold 746 of these cars.

Looking at the performance of its other models, the GT line of vehicles didn’t fare as well, with total deliveries dropping by 24%. But its classic Sports line more than made up for it with 312 cars sold — a 66% increase compared to a year ago.

Despite these impressive figures, the company still reported a £42.2m loss for the period. But that’s a substantial improvement compared to the £110.1m loss recorded in the first quarter of 2020. Overall, it looks like the business achieved some pretty decent results, I feel. So why did the Aston Martin share price stay basically flat on the news?

The risks that lie ahead

Overall, the management team remains confident in its ability to sell a total of 6,000 cars in 2021. And after these latest results, it’s 23% of the way there. While this may seem slightly behind, it’s worth noting that Aston Martin is launching two new models, the Valkyrie and V12 Speedster, in the second half of this year.

However, there remains some reasonable concern surrounding the firm’s level of debt. As of the end of March, Aston Martin has just under £1.3bn of debt to contend with. That’s around 63% of the firm’s capital structure, adding a notable level of solvency risk. After all, with large debt comes a hefty interest bill estimated to be around £145m for this year.

This is still a manageable amount, especially since Aston Martin has £575m of cash on the balance sheet. But this source of funds is finite. And as the business is still unprofitable, it may have to raise additional capital to afford these expenses in the future.

What to do now?

Needless to say, I find these latest results quite encouraging as they show signs that the strategy being employed by the new management team is working. However, I think it’s still too soon to tell for sure. And given that the Aston Martin share price hardly moved on these results, it seems other investors agree.

For now, this business is staying on my watch list. But I’m excited to see how it performs throughout 2021.

The post Will the Aston Martin share price make a comeback? appeared first on The Motley Fool UK.

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• Aston Martin shares are now only 41p!
• There are hundreds of shares I’d rather buy than Aston Martin. Here’s why!
• These FTSE 250 stocks are tipped to rise 46% (or more) in the next year!
• Down 95%, what might it take for the Aston Martin share price to rise 2,000%?
• My personal warning for anyone tempted by the plunging Aston Martin share price

Zaven Boyrazian does not own shares in Aston Martin. 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.

The wave of new companies coming to the market continues apace. The latest new-stock-on-the-UK-block is re-commerce business musicMagpie. Trading of its shares began today on the (junior) AIM market of the London Stock Exchange. As someone who only very recently used its services and loves small-cap stocks, I’m keen to look into the investment case for the company. Should I buy MMAG shares today?

What is musicMagpie?

Founded in 2007, musicMagpie is a dream for anyone who likes to declutter. It specialises in “refurbished consumer technology“. It takes the stuff we no longer want — including smartphones, video games consoles, CDs and DVDs — and then sells it on. Previous owners get some fuss-free cash for their unwanted things and the company pockets the (often sizeable) difference between what it pays to acquire them and what it goes on to sell them for.

Thanks to the multiple lockdowns in the UK, decluttering has become extremely popular. This has proven a boon to firms such as musicMagpie. I can see this momentum continuing for a while yet, particularly if concerns over employment force people to find ways of raising cash quickly. 

So, what’s to like?

Aside from the current demand and simple business model, one thing I like about musicMagpie is that it’s not solely dependent on the UK for earnings. Back in 2014, the company expanded into the US with its Decluttr brand. This geographical diversification could help the company to continue growing at a fair clip going forward. It should also help investors sleep at night. 

A second positive is that musicMagpie has solid environmental credentials. Indeed, it recently received the LSE’s Green Economy Mark. This seal of approval is handed out to businesses that make 50% or more of their total revenue from green-economy-related products and services. This could make the MMAG shares popular, especially among younger investors.

As well as the above, I’m also particularly drawn to the company’s phone rental strategy. This may be enticing for those who 1) don’t wish to shell out hundreds of pounds for a smartphone and 2) regularly want to upgrade.

Last, musicMagpie is already profitable. This makes it a world away from a typical blue-sky, glitzy tech stock. 

Any negatives?

Despite the above, I think there are a few risks to be aware of. Perhaps the most concerning is the level of competition musicMagpie faces and its lack of ‘economic moat’. 

Reselling is hardly a new concept. Rivals in the UK include WeBuyBooks, Ziffit and CeX. On top of this, there are US giants Amazon and eBay. If declutterers have time, they have a good chance of making more money by selling things individually (although, ironically, their competition would be musicMagpie). 

On a more general level, trying to make money from an IPO is tricky. For every stock that does well (AJ Bell), there are many that don’t (Aston Martin, Deliveroo). Factor in the greater volatility seen in the small-cap world and early owners could be in for an ‘interesting’ ride.

My verdict on MMAG shares

At face value, MMAG shares look very interesting. However, that last concern is the most problematic for me. As such, I’m going to sit back and watch the market’s reaction to musicMagpie’s listing before I consider taking a stake. If I miss out on some early gains, so be it.

The post Should I buy musicMagpie (MMAG) shares? appeared first on The Motley Fool UK.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon. The Motley Fool UK has recommended eBay and recommends the following options: short June 2021 $65 calls on eBay, long January 2022 $1920 calls on Amazon, and short January 2022 $1940 calls on Amazon. 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.

Aston Martin

Traditionally associated with speed, luxury, and James Bond, Aston Martin is a long way from its previous heights. Since IPOing in 2018 at 10,914p, the Aston Martin share price has fallen to around 2,030p. However, in the 12 months, the luxury carmaker has made a comeback, rising 45% from 1,401p to 2,030p.

Though this price doesn’t scream buy for me, the company is definitely heading in the right direction. I am most impressed with its new and improved management team, including chair Lawrence Stroll and new CEO Tobias Moers. These two experienced business operators have improved the company’s outlook significantly, while Stroll seeks to revamp Aston Martin’s reputation.

After leading a £500m takeover of Aston Martin last year, Stroll has rebranded his Formula 1 team under the manufacturer’s name. The strategy is twofold: bring success to the track, which will help transform the fortunes of this ailing brand. 

While all of these are exciting developments, I believe that Aston Martin is still a risky investment. The luxury carmaker has made a string of mistakes over the past few years. It failed to match supply and demand, which led to excess production of its vehicles. It also borrowed too much money as it tried to develop new models.

As a result of these two mistakes, last year, the company was forced to ask shareholders and other creditors for more money to keep the business afloat. It has also had to write off millions of pounds of excess stock. 

I definitely need to see a bit more innovation and electric vehicle investment before I invest. In the meantime, my foolish colleague Rupert has some other dirt-cheap UK stocks as alternatives.

Rolls-Royce

Two weeks ago I was asking myself if I should buy Rolls-Royce shares. Over the last 12 months, the Rolls-Royce share price is down by almost 10% to 111p from 120p. 

Rolls-Royce actually accrued losses of £4bn in 2020. However, this company is a leading aerospace player, and that’s where my bullish attitude comes in. Once lockdown ends and full flight normality returns, a lot of airplanes will need maintenance. Rolls-Royce sold £3.2bn of civil aircraft engines in 2019 and recorded a further £4.9bn in service revenues for the sector. Even in 2020, with Covid-19 severely limiting flights worldwide, service revenues came in at £2.8bn.

There is still a major risk that the airline industry could be irreparably damaged for years to come. With European Covid-19 cases on the rise, there is a real danger of prolonged flight grounding. This will severely affect its bottom line. 

Despite these bear cases, I’m firmly set on adding Rolls-Royce to my shortlist due as I believe its aerospace strength makes it worth the risk. 

The post Should I invest in Rolls-Royce or Aston Martin shares right now? appeared first on The Motley Fool UK.

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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.

Buy the dip?

One reason for thinking that we may have already seen the worst is that Deliveroo’s current valuation (£4.8bn) is now far more sensible than its price at IPO (£7.6bn). That’s clearly a lot more palatable for prospective investors looking for stocks boasting market-leading tech. On top of this, I can’t ignore that the firm has been growing revenue like the clappers over the last few years. It also operates in 12 countries, giving the Will Shu-led business some geographical diversification. 

Another reason for thinking the Deliveroo share price might stabilise (and eventually rebound) is that other tech-related stocks have done just that. The share prices of US social-networking giant Facebook and ride-sharing specialist Uber famously tumbled on their market debuts. They’ve since recovered strongly. Indeed, the former is now one of the biggest listed companies in the world! Sure, other previously-hyped UK stocks such as Aston Martin show that recovery is far from guaranteed. Nevertheless, Deliveroo’s existing investors can take heart knowing that it’s not impossible. 

That said, there are still a lot of things that bug me. 

Reasons to steer clear

Surely one of the biggest drawbacks to investing in Deliveroo remains the competition the company faces. Rival Just Eat Takeaway.com has 10 times the number of active customers. Even so, this isn’t reflected in the valuations of the two businesses. (£11bn vs Deliveroo’s £5bn). Having been around longer, the former also has a financial track record that we can properly scrutinise.

Speaking of which, Deliveroo still doesn’t make a profit. Now, that’s not held back other tech-related shares in the past. Electric car-maker Tesla is a great example. However, it’s worth reminding ourselves that these can be among the hardest-hit shares in the event of a market crash. Regardless of whether this happens soon, Deliveroo could still become a victim of the move towards value stocks we’ve seen over recent months.

Third, there’s the ongoing threat of industrial action by its riders. Indeed, one reason given for the shambolic Deliveroo IPO was that institutional investors were concerned over how its workers were being treated. Many will continue to keep their distance unless these worries are put to bed. This, in turn, could hold the share price back. 

On top of all this, the gradual lifting of coronavirus-related restrictions might make things tougher for Deliveroo going forward. After all, a lot of people look primed to spend in restaurants rather than on takeaways for the rest of 2021. Some (temporary) softening of demand looks inevitable. 

Better opportunities elsewhere

I don’t know where the Deliveroo share price is going in the near future. Nobody does. There are simply too many variables to take into account when trying to estimate where the company’s valuation will be in a few days or weeks. 

As a long-term investor, however, I still have significant doubts about the company’s ability to make me and other investors more money compared to other highly profitable growth stocks. 

Have we seen the bottom? I wouldn’t count on it. 

The post Have we seen the bottom for the Deliveroo share price? appeared first on The Motley Fool UK.

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Facebook and Tesla. The Motley Fool UK has recommended Just Eat Takeaway.com N.V. and Uber Technologies. 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.

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.

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.

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.

The post Will the Aston Martin share price recover in 2021? appeared first on The Motley Fool UK.

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• There are hundreds of shares I’d rather buy than Aston Martin. Here’s why!
• These FTSE 250 stocks are tipped to rise 46% (or more) in the next year!
• Down 95%, what might it take for the Aston Martin share price to rise 2,000%?
• My personal warning for anyone tempted by the plunging Aston Martin share price

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.

Aston Martin: an IPO car crash

Aston Martin accelerated on to the scene to great fanfare in October 2018. Shares were priced at £19 a pop, valuing the business at an astonishing £4.3bn. Unfortunately, a toxic combination of falling sales, increasing losses and the arrival of the coronavirus sent the shares crashing. Those who were early to this ‘party’ would now be sitting on a loss of around 90%. 

Could this have been predicted? There was certainly a red flag or two. The fact that Aston Martin had already gone bust seven times in its history was hardly comforting. There are, however, a few more general reasons why it’s usually best to stay away from IPOs. 

You’re buying what someone doesn’t want

In the midst of an exciting new listing, it’s easy for investors to forget that the opportunity to buy is only there because someone else is wanting to sell. Naturally, this seller will also want the best price they can get.

A high asking price for shares at an IPO is problematic for investors because it increases the likelihood of a company lagging the market once the hype dies down. Remember that traders will be buying in the hope of ‘flipping’ their shares soon afterward, hopefully at a big profit.

As a result, a lot of companies only go to market when the mood feels right, not necessarily when they’re making good money or have no debt. Go back to the dotcom bust at the turn of the millennium and you’ll find lots of businesses that weren’t making any money at all!

Of course, this isn’t to say some stocks won’t spring back to form eventually. Shares in social networking giant Facebook famously plunged in value when they came to market, partly over concerns the company might not be able to monetise its platform. Fast-forward eight years and Facebook is now one of the biggest firms in the world.

What I’d do instead

For the reasons mentioned above, I think it’s usually best to avoid buying newly-listed shares. This is the case even if the price rockets on the first day, as happened with Snowflake recently.

Instead, I’d use the time to conduct some thorough research. For starters, find out who’s selling and why. Could it be because they want to cash in on the hype surrounding a particular product or service that will likely prove temporary? Also, check whether they still intend to hold a significant stake in the company post-IPO. Andy Bell — founder of broker AJ Bell — is a good example of this. 

In addition to this, it’s also worth comparing a company’s valuation at IPO to that of another business in the same industry. If there’s a notable difference between the two — and no clear reason why — it’s probably best to steer clear. Aston Martin’s IPO share price was even more ludicrous compared to luxury rival (and profit-making) Ferrari’s valuation, given the former’s questionable track record of managing its finances.

The post The Aston Martin share price is a lesson to avoid IPOs. Here’s what I’d do instead appeared first on The Motley Fool UK.

More reading

• Aston Martin shares are now only 41p!
• There are hundreds of shares I’d rather buy than Aston Martin. Here’s why!
• These FTSE 250 stocks are tipped to rise 46% (or more) in the next year!
• Down 95%, what might it take for the Aston Martin share price to rise 2,000%?
• My personal warning for anyone tempted by the plunging Aston Martin share price

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Paul Summers owns shares of AJ Bell PLC. The Motley Fool UK owns shares of and has recommended Facebook. The Motley Fool UK has recommended Snowflake Inc. 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.

Does this mark the beginning of a more sustained recovery in the share price? I think it unlikely.

Aston Martin’s “challenging six months”

With the coronavirus battering the vast majority of businesses over the last few months, it’s to be expected that today’s numbers weren’t exactly impressive.

Total retails sales tumbled 41% to 1,770 cars in the six months to the end of June as dealers were forced to shut up shop.

As a sign of just how bad things are, the company sold just one car from its special range over the first half of 2020. Contrast this with the 36 vehicles sold over the half-year to June 2019. 

The fact that retail sales were ahead of wholesales, however, did mean that the company made “significant progress” on its goal of reducing dealer inventory and rebalancing supply to demand.

All told, revenue fell 64% to £146m over what new Executive Chair Lawrence Stroll reflected had been “a very intense and challenging six months“. Aston Martin also posted a pre-tax loss of £227.4m. This is up significantly on the £80m loss reported over the same period last year. 

So, why are the shares doing so well today? The only reason I can find is that retail sales in China were up 11% year-on-year in June. Dealerships in China reopened last month. When your share price has already been pummelled, even the merest chink of light is sufficient to generate interest. 

Personally, I’m still to be convinced that the company is investable. 

Steering clear

For one, Aston Martin still carries a lot of debt despite attempting to make cost savings where it can. At the end of June, this stood at £751m. Although lower than it once was, this is still roughly 75% of the company’s entire value. That’s hardly a position of strength.

I’m also somewhat sceptical that the new Aston Martin F1 team will benefit the company as much as management think it will. Sure – motor racing fans will fuss over the cars but is this “significant global marketing platform” even necessary? The brand and quality of the vehicles were never in doubt. It’s the business that’s always been the problem.

Being so dependent on its new DBX model proving popular is also something to be wary of. It might be a wonderful bit of machinery but that won’t necessarily translate to great sales at a time when the global economy is in such a mess.

Bumpy road ahead

Looking ahead, the company said that the uncertainty over the coronavirus means trading “remains challenging in many markets“. Having new and highly experienced CEO Tobias Moers in charge from the beginning of August may reassure those already invested but I can’t see this situation changing anytime soon.

Indeed, should the threat of a second coronavirus wave become a reality, the share price could crash even further. To recap, anyone who invested in the firm back in October 2018 would already be sitting on a loss of around 90%!

All told, I suspect Aston Martin may remain the plaything of traders for some time to come.

For anyone wanting a more comfortable ride, I think there are far better options out there.

The post The Aston Martin share price has jumped. Here’s why I’m not tempted appeared first on The Motley Fool UK.

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• Aston Martin shares are now only 41p!
• There are hundreds of shares I’d rather buy than Aston Martin. Here’s why!
• These FTSE 250 stocks are tipped to rise 46% (or more) in the next year!
• Down 95%, what might it take for the Aston Martin share price to rise 2,000%?
• My personal warning for anyone tempted by the plunging Aston Martin share price

Paul Summers 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.

Sarcasm aside, today’s share price crash following the release of its latest trading statement, and news of another fundraise, are yet more evidence as to why I’d avoid the shares like the plague.

Making “good progress”

Perhaps I’m being harsh. After all, the company has said it’s continuing to make “good progress” on realising its potential and becoming “a true luxury company.“

While trading understandably “remains challenging” in wake of the pandemic — sales are expected to be lower in Q2 compared to Q1 — there are a few green shoots to mention.

First, over 90% of the firm’s dealer network is now open, although only 50% are operating at full capacity.

Having completed all trials and commenced production at its St Athan facility, Aston Martin also said it was also on schedule to release its new luxury SUV (the DBX) in July. The order book for this new vehicle was today described as “strong.“

In addition to this, the company has reduced the amount of cars in showrooms in an effort to “regain price positioning and exclusivity.” By the end of May, unsold dealer stock had fallen by 617 vehicles.

Commenting on today’s statement, new executive chairman Lawrence Stroll said that he was “enthusiastic and confident” about the firm’s multi-year plan to revitalise the company. I’m somewhat more sceptical. 

Show me the money!

Of course, the problem with Aston Martin has never been the cars. The problem has always been the finances. On this front, there was more bad news for existing holders today. 

Despite taking “decisive action” to get costs and investment under control (including the furloughing of employees), the company has once again been required to go cap-in-hand for money. This isn’t surprising — the company hinted as much last month. 

Having been approved for a £20m loan from the government via its Coronavirus Large Business Interruption Loan Scheme, Aston Martin will now seek to raise roughly £190m by selling shares worth just under 20% of the business. Another $68m will be accessed from a credit line at a very high 12% interest. 

If all this jargon sounds confusing, don’t worry. Just know that Aston Martin remains in a pretty precarious financial position. Net debt at the end of May stood at £883m. That’s only slightly less than the value of the company itself. It’s also a truly rubbish situation for those already invested, as the value of their stakes is diluted again.

Avoid Aston Martin

Aston Martin makes beautiful cars. Period. It’s performance on the market since listing, however, is akin to an old banger. It’s also a cautionary tale for all investors. It doesn’t matter how great the product is. Take the time to look beyond the glitz and glamour before pressing the ‘buy’ button. 

The company will release its interim numbers for the first six months of 2020 on 29 July, shortly before new CEO, Tobias Moers, takes the wheel. It’s possible his arrival could prove the point at which the shares gain a surer footing. I wouldn’t want to bet on it though.

Unless you enjoy risky stock market rides, I’d continue to steer clear of Aston Martin. 

The post Aston Martin shares crash another 10%! Here’s why appeared first on The Motley Fool UK.

More reading

• Aston Martin shares are now only 41p!
• There are hundreds of shares I’d rather buy than Aston Martin. Here’s why!
• These FTSE 250 stocks are tipped to rise 46% (or more) in the next year!
• Down 95%, what might it take for the Aston Martin share price to rise 2,000%?
• My personal warning for anyone tempted by the plunging Aston Martin share price

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