Aston Martin Lagonda’s (LSE: AML) share price continues to crumble. It’s fallen another 15% on Wednesday following a frosty reception to third-quarter financials.
At 90p per share, Aston Martin shares are now 95% cheaper on the London Stock Exchange than they were a year ago. Is now the time for eagle-eyed investors to nip in and buy the carmaker at a big discount?
Deliveries downgraded
James Bond’s favourite autobuilder has struggled with supply chain issues and logistics problems this year. And today it reduced its delivery forecasts for the full year following further trouble during the third quarter.
Aston Martin delivered 4,060 cars during the nine months to September, it said. This was down 4% year on year, with its DBX sports utility vehicle particularly affected in the period.
As a consequence, the business now expects to deliver between 6,200 and 6,600 vehicles in 2022. It had previously expected to record wholesale volumes north of this range.
Aston said that the downgrade reflects “new supply chain and logistical disruption we have encountered in the second half”. But it added that it expects these problems “to be short-term in nature following active management of the relevant issues”.
Losses widen
News of widening losses has also driven Aston Martin’s share price through the floor today. The business reported revenues of £857.2m between January and September, up 16% year on year. However, Aston’s pre-tax losses widened to £511.3m from £188.6m a year earlier.
Losses were amplified by a £245m negative non-cash foreign exchange revaluation of US dollar-denominated debt, the carmaker said. This was caused by the pound’s slump against the dollar.
Net debt, meanwhile, rose 3% year on year to £833.4m. It also recorded a free cash outflow of £336m related to the development of new models, interest payments on its debt, and working capital outflows, due to those supply chain and logistics problems.
Should I buy Aston Martin shares?
From an investment standpoint there’s a lot in that third-quarter release that worries me. It’s encouraging that Aston Martin says supply-related and distribution problems “are already improving” during the current quarter. But the odds on these issues persisting, or even worsening, are high, posing a huge threat to deliveries and thus profits.
This is particularly worrying given the huge debts that the luxury carmaker carries, and which is costing the company an arm and a leg to service. Net cash interest payments clocked in at a whopping £65m between January and September.
It’s possible that the business will have to raise extra cash to keep going, possibly in the form of another rights issue. The odds of this are rising too the global economy veers towards recession and the sports car demand outlook darkens.
Aston Martin builds brilliant cars and carries terrific brand power. This is why it continues to believe it will sell 10,000 cars a year over the medium term.
But today, there are massive obstacles it has to overcome to hit this target. I’m a fan of Aston Martin’s products but I wouldn’t touch its shares with a bargepole.
