June was a very good month for Aston Martin Lagonda (LSE:AML). The luxury sports car manufacturer had several pieces of positive news that came out during the month that helped to provide continued momentum for the stock. In fact, the Aston Martin share price jumped 33% over the period. This means that over the past year, the share price has risen by 92%. Here’s what happened.
The Lucid deal
For a while now, the company has been pushing towards making a fully electric vehicle (EV). Let’s face it, electric is the future. So the fact that Aston Martin are willing to explore this side of manufacturing is a big tick for long-term investors.
Earlier this week, the business announced that it is entering a “strategic supply agreement” with Lucid Motors, the US-based EV manufacturer.
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As part of the deal, Aston gets access to Lucid’s industry-leading technologies whereby Lucid will supply Aston Martin with select powertrain components. Lucid will get a 3.7% shareholding in Aston Martin in return (subject to shareholder approval).
This is a great move, as it allows Aston Martin to basically take the best bits of EVs from a peer. It saves a lot of time and hard work, as it’s not a space it has experience in. Investors realised this, hence the share price jump.
Financials still strong
In a Capital Markets day with institutional investors, the business reaffirmed the strong financial outlook for the year.
It said that “it remains on track to deliver its 2024/25 financial targets”. This in itself is a really strong statement, given that the target was £2bn in revenue and £500m in adjusted EBITDA. For reference, Q1 2023 revenue was £295.9m. This gives a 2023 run rate of £1.18bn revenue for the full year.
With that in mind, management is expecting large growth in the space of the next couple of years. Granted, this could just be chat that doesn’t materialise. But for the moment, the market is taking it seriously, shown by the move higher in Aston Martin shares.
Takeover potential
Finally, there was some optimism heading into June regarding a future takeover of the business. Chinese company Geely increased its shareholding in Aston Martin to 17%.
Of course, this doesn’t mean the business is wanting a takeover, but it’s a classic move I’ve seen many time in the past. The shareholder builds up a large stake over time, which then makes it much easier to finish things off further down the line.
I feel investors viewed this as a positive for two reasons. One is that it shows Geely values the business and sees it as a good buy. The other is that any bid could be at a premium to the current share price, netting current shareholders a profit.
We’ll have to see where the stock trades from here over the summer. Yet for the moment, it appears to me that momentum could carry the share price even higher in the short term.
