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Since listing in October 2018, the Aston Martin Lagonda (LSE:AML) share price has… No, I’m going to stop there. I don’t want to upset any long-suffering shareholders. Let’s just say, life as a public company has been difficult.
With the benefit of hindsight, it’s now possible to say that anyone who invested seven years ago would have been better off buying one of the company’s cars (in fact, any vehicle). Yes, it would have depreciated in value but not as quickly as the group’s share price.
Anyone lucky enough to have a few hundred thousand to spend on a new sports car have a number of options available. They could choose to buy one from a specialist manufacturer or opt for a sportier number from one of the more mainstream producers.
The industry’s most famous marque is probably Ferrari. From the 250 GTO — through to the F40 and the modern-day LaFerrari — the Italian legend has been making some fabulous cars since 1929. But there’s trouble in paradise.
A bump in the road
Yesterday (9 October), at its capital markets day, the group disappointed investors with its latest forecast. It says it’s now expecting €9bn of revenue and €3.6bn of EBITDA (earnings before interest, tax, depreciation and amortisation) by 2030.
In a research note, Citi said this was below its “lower growth case” estimate. On both the Milan and New York stock exchanges, Ferrari’s share price fell over 15%. It was the worst one-day performance since the group listed in October 2015.
Often when a competitor’s struggling, there’s an opportunity for a rival to take advantage. If customers think a Ferrari is a bit pricey, they could consider buying an Aston Martin instead. After all, the British icon produces some cool cars too, most of which cost a lot less.
But as if to show sympathy with its Italian cousin, the Aston Martin share price also fell sharply yesterday. It closed the day 12% lower. It looks as though investors think there could be industry-wide problems ahead rather than anything specific to one particular manufacturer.
Difficult times
Indeed, when presenting its third-quarter trading update, Aston Martin said the “global macroeconomic environment facing the industry remains challenging”. In particular, it cited US tariff uncertainty, changes to China’s ultra-luxury car taxes (more vehicles have been brought within scope) and supply chain pressures following the cyber incident at Jaguar Land Rover.
To help shore up its balance sheet, the company’s largest shareholder injected some cash in May. And the sale of its minority stake in the Aston Martin Aramco Formula One Team has brought in another £110m.
Unfortunately, the British carmaker’s problems are pretty serious. As a listed company, it’s never reported a profit. And since being founded in 1913, it’s been rescued from bankruptcy on seven occasions. Also, the path to electrification is proving difficult. By contrast, Ferrari is profitable and has been better at incorporating battery technology into its product range.
Aston Martin is under immense pressure. It’s a sad state of affairs for a company that makes such beautiful objects. But no matter how much I remain a fan of its cars, until it can prove to me that it can make one profitably, I’m not going to consider investing.
