At 513p, could I make big bucks with Aston Martin shares?

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Aston Martin (LSE:AML) shares are down 74% over the past 12 months. But that’s not the worst. The luxury car maker is down 94% over the past three years. It is currently trading at only a fraction of its list price.

Why did the stock price drop?

The stock has to be one of the worst flotations in recent years. The company has continued to disappoint investors over the past three years, taking on more debt and failing to grow as expected.

And things haven’t gotten any better this year. In July, Aston Martin said its first-half losses had widened as supply chain constraints hit production. The company reported a pre-tax loss of £285.4 million in the six months to June 30, compared with a loss of £90.7 million last year.

Aston sold 2,676 wholesale vehicles over the six months, compared with 2,901 the previous year.

However, the luxury car maker, which has pinned much of its hopes on Chinese sales, said it expects a better second half of the year.

For 2022, we continue to expect to deliver significant growth in 2021 with a core volume increase of 8% which is expected to deliver a 50% increase in adjusted EBITDA of the core business“, the company explained.

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Chief executive Lawrence Stroll has high ambitions. In 2021, Aston Martin will ship 6,600 cars. But by 2024/25, Stroll hopes to increase this number to 10,000 per year. The Chair also aims to achieve £2bn in revenue and £500m in adjusted EBITDA by 2024/25.

Revenue for 2021 is just over £1 billion. Whether the company has the capacity to double that in four years, I’m not sure. While there has been no progress in terms of shipments over the past six months, it is important to note that revenue growth is unlikely to be consistent or regular. The pandemic, inflation, recession and China’s lockdown are all playing on demand.

What’s next for stock prices?

One thing that caught my attention was the growing debt. Net debt stands at a sizable £1.26bn, with a cash balance of just £156m. It also sounds like there’s a lot of revenue tied to unfinished cars.

However I am sure that we will see some positive data coming out of business immediately. And I can actually see the stock price spike upwards if the company makes progress toward Lawrence Stroll’s targets.

I truly believe that there is a demand for 10,000 new Aston Martins a year out there. It’s a really cool brand and I really don’t think any other supercar maker comes close when I see the appeal of the vehicle itself.

I’ve bought Aston Martin stock, and they’re not doing very well. But I will buy more and hold on to it for the long haul. At least I will give the company a chance to reach the target of 2024/2025.



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