Since 2018, Aston Martin (LSE: AML) shares have been heading downhill faster than James Bond racing away from villains in his DB5. In fact, shares in the luxury carmaker opened at £19 when they went public just under four and a half years ago. Today, they’re at £2.92, which represents a 92% drop!
Yet things have been looking better recently. The shares are up 36% in the last five days alone. But how would I be doing if I’d spied an opportunity to invest £1,000 in this FTSE 250 stock six months ago?
I’d be winning
The shares were boosted this week by Aston Martin Formula One driver Fernando Alonso’s surprise podium finish at the 2023 Bahrain Grand Prix. That means the stock is now up 72% in six months, so I’d be sitting on a tidy paper profit, as things stand. My £1,000 investment would have grown to £1,720.
As noted though, this gain is out of character with the longer-term trajectory of Aston Martin shares, which has been downwards.
| Time period | Share 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 climbed 4% to 6,412, though it posted a pre-tax loss of £495m for 2022. That was more than double the previous year.
Some of this loss was due to costs associated with its new Valkyrie hypercar, a road-legal F1 car priced at £2.5m. After many years of development, the firm delivered 80 Valkyries during 2022.
The company is also launching a new range of sports cars in 2023 — with higher profit margins — and believes this will lead to a “significant growth in profitability” in the second half of the year. Management is aiming for £2bn in revenues and £500m in adjusted EBITDA by 2024/25.
Worryingly though, the interest on its debt was £139m during the year. And net debt stands at £766m. Reducing this remains a priority for management, and an ongoing risk for the stock if it isn’t.
Should I buy the stock?
Aston Martin’s brand remains iconic and its sports cars are still highly desirable. But I won’t personally be buying any shares. Executive turnover has been extreme and the company has a long history of constantly needing to raise capital to survive. And I see it requiring significantly more funding as it transitions to manufacturing electric vehicles.
For a fast-growing start-up, I’d understand that. But the company has been around for decades. James Bond author Ian Fleming wrote in Goldfinger that: “Bond had been offered the Aston Martin or a Jaguar 3.4. He had taken the [Aston Martin] DB III.”
That was written in 1959. Yet the company remains loss-making. As a long-term investor, that doesn’t really attract me.
Having said that, I can see the stock going higher from here if the turnaround at the company continues. Former Ferrari boss Amedeo Felisa was hired as CEO last year, and is essentially trying to emulate the Italian automaker’s extremely successful ultra-luxury strategy. That means higher prices and profit margins.
Aston’s market cap is £2bn today. That might seem ridiculously small to investors in the future if the carmaker can swing to sustainable profits.
