The Aston Martin (LSE:AML) share price has been trending lower for several years. However, I have the stock on my watchlist, like others, on the premise that one day it may be too cheap to ignore. When I wrote about the company a month ago, I said it wasn’t the right time to buy. If I had decided to buy then with £2k, here’s what it would now be worth.
Another tough month
The stock is down a further 15.6% in the past month, meaning the £2k would currently be worth £1,688. I should note that this is an unrealised loss, and would only actually be realised if the investor sold today.
However, it accurately shows that sentiment towards the company has not improved in recent weeks. Interestingly, since the Q1 results came out in late April, the business hasn’t put out any fresh financial updates that could have negatively impacted the share price. So the move really has been investors carrying over disappointment from the results, along with a lack of any positive catalysts to stop the trend lower.
The results showed a desperate rush to raise funds to help cash flow problems. For example, it spoke of a “new £50m committed facility with certain members of the Yew Tree Consortium” as well as “the completed sale of the Aston Martin F1 naming rights to AMR GP”, both of which boosted the bank balance.
Yet with the business generating a Q1 loss of £65.5m, there still isn’t much good news to shout about.
Looking ahead
There are plenty of reasons why the share price could head lower still. Weak deliveries, disappointing financial results, or further delays to product launches could damage investor confidence. Competition in luxury vehicles is also increasing, particularly as electric vehicles become more important. Aston Martin needs to successfully transition while protecting its brand identity, which isn’t an easy task (or one it’s doing well at the moment).
However, I don’t want to sound completely gloomy. Aston Martin remains one of the world’s most recognisable automotive brands. The company has a refreshed product pipeline, including high-performance models designed to attract wealthy buyers and strengthen margins.
Further, it seems like it has no problem raising more funds to help finance operations. Even though this isn’t sustainable in the long term, it can keep the company afloat for the coming couple of years, with the aim of turning it around by then.
Ultimately, my position is the same as it was last month. I don’t see any catalyst that’s likely to spark a rally in the stock, so I’ll be staying away. There will come a time when it becomes a screaming value purchase, but I don’t think we’re there yet!
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Jon Smith has no positions in the shares mentioned.
