The past year has been a difficult one for Aston Martin Lagonda (LSE:AML). Over this period, the stock is down 60%. Yet in the past month, we’ve seen a strong 42% bounce, compounded last week when the Aston Martin share price jumped 19%. As we head to the last major trading week of the year, is there something happening that I need to be aware of?
Building on last month
In the past week, there have been no announcements or major company-specific news that justify such a strong share price move. In fact, I put the move down to a continuation of the performance from the weeks prior.
Last month, the business released Q3 results. Even though the loss before tax for the quarter helped to push the year-to-date loss to £511m, there was actually a lot to be positive about.
Revenue for the quarter was 33% higher than the same quarter last year. On a year-to-date basis, it’s up 16%. This has helped operating profit to jump 29% on this same period comparison.
In fact, even the jump in the loss isn’t that conventional. It took a £245m hit earlier this year from the revaluation of US dollar denominated debt. Given that the business operates in pounds sterling, the weakness in the currency this year means it’s more expensive to pay off US dollar debt. However, this is a non-cash impact and shouldn’t be used to show that the core business model of selling cars is flawed.
Given that the stock has really taken off since the release of these results, the market clearly took the report in a positive light.
Insider buying more stock
Another development in November was the confirmation that executive chairman Lawrence Stroll had bought more shares in the company.
I think this has supported the rally in the stock over the past few weeks, including the jump last week. The information regarding company directors or others affiliated with a listed stock is made public quickly. So when an insider buys or sells stock in their company, it can often be seen as a positive or negative by the rest of the market.
Increasing his stake in Aston Martin shows me that Stroll believes in the future of the car manufacturer. It also shows me that he feels now is a good time to purchase shares in the business. This could be because he thinks the stock is undervalued.
Room to run for the Aston Martin share price
At 173p, there’s still a huge amount of room left for the stock to rally in coming weeks. The year-to-date high is 1,493p, showing just how far the share price has fallen this year.
Yet even though I think it could keep going, I’m not that comfortable investing now. The UK is potentially already in a recession. So, I don’t think luxury sports cars are going to be in high demand here in 2023. Further, the losses already incurred this year will make it hard to pay down any of the pandemic debt taken on.
Despite the pop last week, I’m going to sit this one out.
