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Since 2018, Aston Martin (LSE: AML) shares have fallen faster than James Bond races away from the villain in him. DB5. In fact, shares in the luxury car maker opened at £19 when it went public just four and a half years ago. Today, it is at £2.92, which represents a 92% drop!
But now it looks better. Shares are up 36% in the last five days alone. But what if I find an opportunity to invest £1,000 FTSE 250 stock six months ago?
I will win
The stock was boosted this week by the driver of Formula One Aston Martin, Fernando Alonso, a surprising podium at the Bahrain Grand Prix 2023. That means that the stock is now up 72% in six months, so that I will sit on a neat paper profit, as it stands. My £1,000 investment will grow to £1,720.
As noted, these gains are not in line with the long-term trajectory of Aston Martin shares, which have been down.
| Time frame | Stock price performance |
| 3 years | -54% |
| 2 years | -59% |
| Year to date | +87% |
2022 performance
Last week, Aston reported full-year revenue of £1.38bn, up 26% year-on-year. Car sales rose 4% to 6,412, despite a pre-tax loss of £495m for 2022. That’s more than double the previous year.
Some of this loss is due to the costs associated with new ones Valkyrie hypercar, a road legal F1 car worth £2.5m. After years of development, the company will deliver 80 Valkyries by 2022.
The company is also launching a range of new sports cars in 2023 – with higher profit margins – and believes that this will lead to “significant growth in profits” in the second half of the year. Management is targeting £2bn in profits and £500m in adjusted EBITDA by 2024/25.
Worryingly, however, the interest on the loan was £139m during the year. And net debt is at £766m. Reducing this remains a priority for management, and risks continue for the stock if it doesn’t.
Should I buy shares?
The Aston Martin brand remains in good standing and sports cars are still in demand. But I won’t buy the stock. Executive turnover has been extreme and companies have a long history of constantly needing capital to survive. And I see a need for more funding because of the transition to electric vehicle manufacturing.
For a fast-growing startup, I would understand. But the company has been around for decades. James Bond author Ian Fleming wrote in Golden fingers is: “Bond has been offered by Aston Martin or a Jaguar 3.4. He has taken it [Aston Martin] DB III.”
That was written in 1959. But the company still made losses. As a long-term investor, this does not appeal to me.
Having said that, I can see the stock going higher from here if the turnaround in the company continues. The former Ferrari boss Amedeo Felisa was hired as CEO last year, and essentially tried to emulate the ultra-luxury strategy very successful in the Italian automaker. That means higher prices and higher profits.
Aston’s current market capitalization is equal to 2 billion. That may seem too small to investors in the future if the automaker can make a sustainable profit.
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