Aston Martin Lagonda (LSE: AML) is in the news again, and it’s never good news when it’s something that’s going to hit the bottom line. It’s all about a dispute with Swiss car dealer Nebula Project. Aston Martin alleges the dealer withheld customer deposits for its Valkyrie sports car, and has commenced legal action. The dispute is apparently going to hit this year’s profits to the tune of around £15m. The Aston Martin share price dipped a couple of percent on the news, which isn’t too bad.
But the stock’s early June gains have reversed, and we’re looking at a 17% fall from February’s high (although a 33% rise year-on-year). It seems the enthusiasm that greeted the arrival of the company’s new management team might be waning. So, does this period of share price weakness signal a buying opportunity? Those who missed the steady rise that kicked in towards the end of 2020 might see it like that. But I’m not so sure.
I have one big difficulty in thinking about Aston Martin. And that’s separating the company we see today from the one that ambitiously came to market in 2018. But that separation needs to be done, because I reckon they’re two very different companies. With hindsight, we can now see that the one that floated amid so much fanfare had its head in the clouds. Ambitions were plentiful, but it was mostly wishful thinking. And after the AML share price lost 90% of its value in the first two years, it looked like the company was set to go bust for the eighth time in its long history as a top marque.
AML share price crash
If the aftermath of the AML flotation did nothing else for my investing strategy, it reminded me of why I don’t buy at IPO. Anyway, the new management looks far more switched on to me. And Lawrence Stroll’s vision for the company seems far more realistic.
Saying that, it is still hard to put that catastrophic AML share price slide out of my mind. Remember that old saying that past performance is not an indicator of future performance? I think that’s especially relevant here. But though I do place significantly more trust in the abilities of the new management team, I’m still going to wait and see.
Q1 looked reasonable
The biggest uncertainty is financial. And the best we have to go on is the firm’s Q1 trading update. It was in line with expectations, and AML described its transformation progress as excellent. Wholesale volumes rose by 134%, while revenue increased 153% to £224m. That’s good news. But it’s against the first quarter of 2020, which is not a very high bar to beat. Still, Aston Martin did report a positive adjusted EBITDA of £20.7m — but there was an adjusted operating loss of £15.3m. Yet net debt fell, from £956m a year previously, to £723m, which is good.
So will I buy? No, not now, because there’s still far too much uncertainty for me. I still think, however, that the AML share price could look attractive once we see further progress.
