Aston Martin share price forecast: Can luxury car maker AML survive amid mounting losses, growing debt?

James Bond may prefer the luxurious and opulent cars made by British carmaker Aston Martin Lagonda (AML), but investors have not been fans of the company's share price performance.

Mounting debt, a controversial rights issue plan and a recent lawsuit have overshadowed the company’s still strong sales and financial performance. As of 15 September, Aston Martin’s share price has fallen more than 80% year-to-date.

Amid the headwinds, will the British marque be able to rebound? We dive into the company’s recent earnings, share price history and the latest news that may shape and Aston Martin share price forecast.

What is Aston Martin?

Aston Martin Lagonda Global Holdings PLC (AML) is a British luxury carmaker.

The company was formed by a combination of two brands: Aston Martin and Lagonda. Aston Martin was founded in 1913 by engineers Lionel Martin and Robert Bamford, who shared “a passion and a talent for machines, propulsion, engines and racing.” Lagonda was founded in 1889. The late British businessman Sir David Brown purchased the brands in 1947, combining them into one business.

Based in Gaydon, England, Aston Martin has long been known for a variety of widely praised luxury models, such as the Vantage, DB11, DBS and DBX, as well as its first hypercar, the Aston Martin Valkyrie.

After decades of being a private company, Aston Martin Lagonda went public on 3 October 2018 at the London Stock Exchange (LSE). The initial public offering (IPO) was priced at £19 a share. 

In January 2020, Aston Martin sold up to 20% of its stake to a consortium led by billionaire Lawrence Stroll, which opened the door for the British marque to return to Formula 1 racing.  As part of the deal, Stroll’s Racing Point F1 team rebranded to Aston Martin.

Aston Martin’s historical share price

Since its debut in October 2018, the AML share price has been mostly on a downward trend, losing more than 90% of its value, as of 15 September. 

Over 2021, Aston Martin’s share price managed to climb to between £19 and £21 after dropping to as low as £5.50 in mid May 2020 when Covid-19 restrictions hit demand.  

During 2020, the company’s retail sales dropped by 32% and wholesale sales by 42%. Aston Martin’s shares lost around 32.6% of their value in 2021, compared to a 39.8% drop over 2020.

In the last quarter of 2021, the share price began to decline as the company’s mounting debt continued to be a concern for investors. In the third quarter of 2021, AML’s debt swelled to £809m, compared to £727m in December 2020, the carmaker revealed.

The company’s performance, on the other hand, had recovered. Total sales volume surged by 173% respectively in the third quarter 2021.

In 2022, the AML share price opened at £11.95 on 3 January and spiked to £14.61 four days later after the firm revealed that sales to dealers had grown by 82% in 2021. However, since then the price has continued to fall. 

The price briefly recovered to above £10 at the end of March, before resuming the downtrend. On 4 May, the price jumped more that 6%, hitting an intraday high of £9.60 after the company announced the appointment of Amedeo Felisa as its new CEO, a position he once held at Ferrari. 

However, since May the share price has given up the gains. The price declined after the company announced on 15 July that it would be launching a rights issue to raise £575m. The corporate action was part of  a fundraising bid with the Saudi Arabia Investment Fund (PIF),  AML’s second largest shareholder.

Prior to the announcement, the AML share price fell 7.68% to a low of £3.66 on 14 July. 

The company said it intended to use proceeds from the rights issue to reduce debts and finance capital expenditure for developing the next generation of sports cars and its first electric vehicles (EV).

As of 15 September, the share price has dropped 88.43% year-to-data.

Rights issue plan, lawsuit hurt share price 

On 5 September, the company saw its share prices fall more than 15% after it revealed the details of its rights issue plan. The carmaker announced it will issue 559 million new shares, each available at 103p.

The price represented a 78.5% discount to the closing price of 480p per ordinary share on 2 September, according to the company’s prospectus. As a result, shareholders had their holdings diluted by 16.67%.

Dilution could reduce the value for individual investors. It means that even if the company performs well in the future, individual investors may get less financial advantage per share than before the corporate action.

“While it says the new money should help it achieve strategic goals, this might simply be Aston Martin finding another piece of frayed rope to keep it afloat and avoid sinking completely into quicksand,” AJ investment director Russ Mould wrote on 5 September.

“The key question is for how long the rope will stay intact before the company needs help again. The car manufacturer has been a flop since joining the stock market and one has to wonder if it would be better off as a privately-owned company.”

The Financial Times reported on 14 September that the automaker was being sued by two former dealers who claimed they are owed about £150m for financing the creation of its Valkyrie hypercar.

The details were not made public, as it was a private arbitration, the FT said. 

First-half 2022 earnings: Supply chain disruptions hurt sales

Aston Martin’s wholesale sales dropped 8% in the first half of 2022, to 2,676 from 2,901 vehicles in the same period a year ago, due to supply chain disruption, the company said on 29 July.

Widespread supply chain issues, notably with ongoing chip shortages, have delayed vehicle production and hurt sales worldwide. Chips are needed in car manufacturing for features such as automatic braking, power steering and airbag deployment.

According to J.P. Morgan Research on 11 August, the chip shortage was nearing the end, with more chips becoming available in the second half of 2022. It forecast global car production to rise 7% in the 2023 fiscal year as the chip shortage gradually improves. 

Despite lower sales, the company reported that it has fully sold out its GT/Sports cars into 2023 and DBX orders were more than 40% higher year-on-year.

Aston Martin reported an 9% revenue increase to £541.7m in the first half year-over-year (YoY) and a 20% increase in its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortisation) to £58.6m.

However, Aston Martin’s operating loss widened by 137% in the first six months of 2022 to £89.6m. Net debt rose to £1.266bn, from £791.5m in the first half of 2021.  

The company maintained its guidance of 6,600 vehicles for 2022, with a 50% improvement in adjusted EBITDA.

For the mid-term outlook, the company was on track to achieve its 10,000 vehicles wholesale target, £2bn revenue and £500m adjusted EBITDA by 2024/2025. 

Analyst views on Aston Martin’s rights issue plan

The market had reacted positively to Aston Martin’s rights issue plans announced in July, which indicated concerns about the group’s financial position as its cash flow was not expected to turn positive until later 2022, Hargreaves Lansdown analysts wrote on 29 July.

“The pumped-up war chest should help new CEO, Amedeo Felisa, push the revamped strategy forward,” the company said. 

The plan called for a total revamp in the way Aston Martin sells vehicles. The group scaled back dealer inventory levels, causing the supply to fall short of demand. This encouraged higher prices and, possibly, raised the cachet associated with owning an Aston Martin.

“The group also focused on selling higher-margin Specials. Customers sign up and pay a deposit for these rare models before they're built, allowing for tighter working capital control. The cars have also become cheaper to make thanks to efficiency improvements,” Hargreaves Lansdown analysts said.

As for Aston Martin’s plan to enter the EV market, Hargreaves Lansdown expected it could take until 2030 for the company’s EVs to become available following the first hybrid cars to be released in 2024.

“Near-term, the group looks likely to deliver on its promises. But the execution of the electrification strategy will be a key driver of long-term success, and we've yet to see whether customers will come along for the ride. Putting the new cash hoard to efficient use is the challenge from here, and that's not an easy task.”

Aston Martin share price forecast: 2022-2025 targets

As the company could struggle with its debt pile despite the expected strong growth, what will be a plausible AML share price forecast?

MarketBeat’s Aston Martin share price forecast saw the stock climb up to £10.53 in 12 months, with a high price target of £14.30 and low of £4.30, according to a poll of three analysts, as of 15 September. The consensus rating for the AML share price from the three analysts was ‘hold.’

Nine analysts polled by MarketScreener offered 12-month price targets for Aston Martin Lagonda at an average of £7.31, with a high estimate of £14.30 and a low forecast of £1.59.

The nine analysts rated Aston Martin stock a ‘hold.’

Neither Market Beat nor Market Screener provided a long-term Aston Martin stock forecast. 

Algorithm-based price prediction service Wallet Investor offered projections using Aston Martin’s historical price data.

As of 15 September, WalletInvestor offered bullish Aston Martin share price predictions, labelling the stock an “awesome long-term investment”.

Wallet Investor’s Aston Martin share price forecast for 2022 projected the price to reach £7.35 in December 2022. For Aston Martin share price forecast for 2025, the service expected the stock to trade at £16.91 in December 2025 and £16.86 in December 2027.

When looking for AML share price forecasts, keep in mind that analyst and algorithm-based forecasts can be wrong. AML forecasts shouldn’t be used as a substitute for your own research. It is critical to conduct your own due diligence before trading, looking at the latest news and commentary, technical and fundamental analysis.

Note that past performance does not guarantee future returns. And never trade money that you cannot afford to lose.

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