Aston Martin – Buy the Cars and the Shares

This is quite a U-turn for us – a full hand-brake, opposite-lock wheels-spinning 180-degree about face. Ever since the shares were launched at £19.00 each, we have been fearful that Aston Martin (ticker AML) has been trying to do too much, with too few resources. Now that the shares are almost in penny territory we say BUY! Fill your boots – or at least fill that curvaceous trunk at the rear of your gorgeous Aston Martin.

Our previous articles, Great New Aston Martin Models in Geneva – but What About The Shares?, No U-Turn on Aston Martin (AML) – Yet!, and Aston Martin Still Has a Mountain to Climb* may have given the impression that we felt AML was on the downhill road to bankruptcy.

So what has changed?

Lawrence S Stroll

Since our last report, Canadian billionaire Lawrence Stroll has bought a quarter of the company and installed himself as Chairman. More importantly, he has assessed the company as a businessman rather than as a car enthusiast. So he can see that everything hangs on getting the new DBX model (a long overdue SUV) into series production. So the peripheral distractions – such as re-introducing the Lagonda brand as as an EV – need to be abandoned to focus on what counts.

Do we think Aston Martin has a long-term future as an independent car maker? In a word, Nope, Not A Chance! Okay, so that was four words – what do you want, a financial analyst that can count??

We still see AML being bought by Daimler Benz or Geely (see our earlier article about their ambition). The difference now is that Aston Martin will be bought from the shareholders, not the receiver.

Aston have announced that they intend to restart production in the new factory at St Athan. There may not be a huge launch event for the DBX, but you can be sure there will be plenty of column inches to cover it.

The night is always darkest before the dawn. Right now, things look a bit iffy for AML, with closed factories, a high-interest loan to service and all the challenges of building a new car in a new factory – and then launching it into a market new to the company. However, if you wait to see how the company performs launching and building the DBX model this summer, the opportunity will be gone. They closed last night at 59p, having been as low as 49p this week. By Chrismas, the shares will be back at £5.00 each, as the financial world recognises the turn-around of this magnificent company.

Buy now. These shares are due to motor upwards! (Sorry, I so nearly managed to resist motoring puns throughout this article.) Then go and order a DBX.

IMPORTANT: Please see our disclaimer. We are only commentators. Readers must review any potential share purchases or sales ideas with their special advisors before going ahead.

Aston Martin Still Has a Mountain to Climb*

* Which is kind of ironic given that it was named after Aston Clinton Hillclimb!

An Aston Martin – climbing a mountain

Since we yanked on the handbrake for AML shares in March, and again in May, how have things been? Initially, almost as soon as we made our most recent forecast, the pesky management went and bought a few shares for themselves, and the price rallied £2. Not the best of starts.

AML ugly price chart – and it’s down another £1 today

Since then, more teasers of the make-or-break DBX SUV have been released.

DBX on test in Sweden

Autocar are carrying a report that the order-books are to be opened next month at Pebble Beach. Despite our view that we have seen peak SUV, the DBX fits into the mould. To be fair, it’s not as ugly as a Bentley Bentayga, nor the Rolls Cullinan. To us, it looks rather like a Porsche Cayenne with an Aston-shaped grill nailed on to the front. So it should sell well initially, though we continue to fear that sales will fall off a cliff-edge in 2 or 3 years time as EV’s take over.

And the latest news?

Talking of sales falling off a cliff-edge, yesterday it was announced that deliveries to dealers in the second quarter were down 22% in UK and 28% in EMEA. Over the twenty four hours since then, the shares have collapsed from £10 to £7, which we can disclose is a 30% fall (see, we’ve always had a natural flair for numbers).

Our view remains that at some time, the shares of this iconic brand will represent good value. But it is not yet. There remains huge delivery risk on the crucial DBX project. And just too many variables in the world luxury car market.

As before, we recommend BUY THE CARS, SELL THE SHARES. Is it time for my bonus yet? (Ed. NO!)

No U-Turn on Aston Martin (AML) – Yet!

At the time of the Geneva show, we recommended ASTON MARTIN – BUY THE CARS, AVOID THE SHARES. We didn’t buy the shares. Sadly, we weren’t able to buy the cars either. One day, it will be time to brake (break) our recommendation, reverse our view, steer in a new direction and accelerate purchases. Okay, now with the car-puns done, as before, let’s have some pictures before getting to the boring numbers.

Aston Martin Vantage – is it bonus time for me yet? (Ed; NO!)

AM-RB 003 – sold out already!

So to the financials.

AML Financials still look scary

The numbers still don’t look great, (Data from Sharecast.com) with strong growth in revenue required before a decent profit can be made. Turning the numbers around relies on the forthcoming SUV, the DBX, being introduced successfully and selling well. All the industry pointers confirm that this vehicle will sell at great speed and with good margins. However, it is being built in a new factory in Wales (not that the location is desperately relevant, I’m sure that the Welsh have produced outstanding engineering in the past, like, er…. didn’t the Sinclair C5 get built there?) Anyway, the fact is that a new factory producing a new type of car does hold some risks – just ask Elon Musk at Tesla.

AML Share Price since IPO

Here is the share price chart….. not looking like the trend has reversed yet is it? We’ve helpfully added the point where we advised not to buy last time! How modest of us!

Where Next For the Share Price?

Reasons for Up!

  1. Once sales of the DBX SUV fire up, revenues and profits should race away

  2. Autocar has reported that sales of the AM-RB 003 £1 mio hypercar are over-subscribed

 

Reasons for Down!

  1. The trend is firmly downwards – expect it be be oversold before it rebounds

  2. First quarter results confirmed our expectations that new-model investments will eat margins for the foreseeable future

  3. There remains huge delivery risk on the “saviour” SUV project

  4. Market cap remains twice revenue, whereas we would expect it to be closer to a 1:1 ratio

At some point in the future, these shares will be good value. That will be when revenues have grown, new products are selling well or at least have had good launches. Right now, we expect the selling to continue until perhaps 600p.

When we consider investing in AML shares, we find ourselves shaken, not stirred! Steer clear.