Aston Martin (LSE:AML) shares have been on a rollercoaster journey. Over the past year the stock is up 88%, but over the past three months it has fallen 45%. With the end of the year looming, I’m starting to think about how I can get a head start on 2024. One way is to try and identify and buy a stock now that has the potential to rally. So is Aston Martin the pick I’m looking for?
Reasons to buy the stock
Unsurprisingly, the moves in Aston Martin share price have reflected the changes in sentiment over the past year. The jump over the longer period reflects the improvement in some financials versus the previous year. For example, revenue for 2022 was up 26% year-on-year. With H1 2023 revenue also up 25% versus H1 2022, it’s clear that demand for vehicles is high.
Ultimately, this is the core of any successful business. The firm is pushing forward and making cars that customers want. This includes the popular SUV DBX, along with the launch of the DB12 coupe. In the works is an electric car, which the UK government has provided funding of £9m.
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If this revenue increase continues in 2024, it makes it easier for the firm to get back to profitability, helping to boost the share price.
Another reason to buy the stock is because other investors are clearly optimistic. The Yew Tree fund, led by chairman Lawrence Stroll, bought more stock recently to take the shareholding to 26.23%. If these experienced investors are increasing their holdings with the share price at current levels, it’s a good sign.
Reasons for concern
In the latest Q3 results from the start of November, delays with the DB12 model mean the volume outlook has been revised lower. The company simply can’t afford to have these downward revisions. This was a factor why the share price has fallen in recent days.
Investors also need to be aware that even though there’s optimism around the brand, the bottom line still isn’t pretty. The firm has been loss-making for several years and looks set to post a full-year loss for 2023.
Even though the outlook for coming years is better, it’s difficult to get too excited about this when the business has been generating losses for so long. If we strip things back to basics, there’s little value in investing in a company that can’t make money!
Bringing everything together
I’m cautiously optimistic about Aston Martin for 2024. I think the stock could rise next year, so I’m considering investing in the firm now. However, I can’t claim this to be the knock-out growth stock of 2024. I think it’s a good opportunity for investors to consider, but still comes with risks.
