Luxury sports car maker Aston Martin’s shares stabilized Thursday after unexpectedly sharp first-quarter losses triggered weakness. But analysts reckon the long-term game plan remains intact.
Aston Martin shares dived an initial 14%, then recovered half of that after news Wednesday adjusted pre-tax first-quarter losses widened to £111 million ($139 million) from £57 million ($71 million) in the same period last year. Sales fell 10% to £268 million ($335 million).
The shares lost another 1.7% Thursday to close at £1.36, according to Reuters. The shares had been as high as £4 last August.
Aston Martin said it expected a similar performance in the current quarter, with improvements in the second half as deliveries of new products like the V12 flagship sports car gather pace.
Aston Martin deliveries have been hit by software problems, with deliveries sinking 26% in the first quarter to 945. Deliveries of the big-selling DBX SUV fell by 250 as buyers held off ahead of the expected face-lift.
“All the software problems are behind us,” Chairman Lawrence Stroll said late last month at a company event.
Aston Martin’s near and medium-term forecasts include raising annual sales to £2.5 billion ($3.1 billion) within 4 years and earnings before interest, tax, depreciation and amortization (EBITDA) of £800 million ($1 billion). The long-term sales target was 17,000 sports cars and SUVs a year. 6,620 vehicles were sold in 2023. The DBX accounted for almost half of that.
British-based automotive analyst Charles Tennant said despite worrying losses, the new model pipeline includes a refreshed DBX.
“This represents another quarter of losses – worryingly almost double forecasts – justified by Lawrence Stroll as “an expected period of transition” which feels like déjà vu as the transformation goes on and on,” Tennant said.
“Of particular concern is that sales of their popular DBX SUV seem to have fallen over a cliff at 63% down and I assume this may cause dealer stocks to increase – a problem that Aston Martin will not like as it strives to move to a build-to-customer order pipeline. But it’s not all bad news as they have four new models out this year including an upgraded DBX SUV which may stimulate demand for their products,” Tennant said in an email exchange.
Bernstein Research analyst Harry Martin, saying the buy case was unchanged, agreed the improved model lineup from the second half of this year will drive average selling prices and profit margins higher.
“The market will also have a well-respected new CEO to add to the positivity in the second half,” Martin said in a report.
Former Bentley leader Adrian Hallmark is joining as CEO in the fall.
Martin said the severe stock market reaction was surprising even though Aston Martin has what he called a “patchy record of execution”.
“Key concerns include the extent of the DBX demand drop-off, why the order book is still well shorter than 12 months, and on the analysts call there are still lingering concerns on liquidity,” Martin said.
Chairman Stroll has been forced to repeatedly raise capital since taking over the company in 2020, bringing in shareholders like Saudi Arabia’s Public Investment Fund.
Martin said over coming months investors won’t want to hear talk of any manufacturing delays and need solid news of free cash flow progress.
Tennant agreed the arrival of a new CEO is positive news, while the earlier announced delay in going electric looks timely given the stutter in electric vehicle markets.
“I think they have a jewel in the crown coming later this year with the ex-Bentley chief Adrian Hallmark taking over as CEO. Delaying their battery electric cars until 2026 whilst focussing on plug-in hybrids seems as prudent move as we all know that global EV sales have dipped particularly for the higher end cars,” Tennant said.
Aston Martin more than halved its losses last year to an adjusted pre-tax £171.8 million ($215 million) from £451 million ($564 million) in 2022.
The Aston Martin lineup includes the Vantage road car, Vantage GT4 for racing, the Valkyrie, DB12, DBS and the DBX.
