The Aston Martin (LSE: AML) share price is racing ahead today, up almost 15% this morning.
That’s good news for me, as I was daft enough to buy the James Bond car maker last year. I bought it to take advantage of a 90%+ drop in the value of its shares. Surely they couldn’t drop any further, could they? I should have known better.
Despite today’s impressive rebound, Aston Martin shares are still down 54% over one year and 97% over five.
So is today’s rebound the start of a brilliant return to form? I’m not convinced. To me, it looks like Aston Martin shares have just been swept up in current stock market volatility. They fell 9% yesterday. They tend to plunge faster than the market when investors are feeling nervous, and soar faster when they’re feeling bullish.
How risky is this FTSE 250 stock?
When the company publishes results, the outcome is easier to predict. More pain for people like me. The FTSE 250 group’s latest market update was released on 26 February, and it wasn’t good.
Aston Martin reported a widening of pre-tax losses to £289.1m, up from £239.8m the year before. Revenue dipped 3% to £1.58bn, while wholesale volumes fell 9% to 6,030. These don’t indicate recovery mode to me.
Management is cutting around 5% of its global workforce, shedding 170 jobs. This should save around £25m but cost-cutting can only go so far. Aston Martin still needs to drive revenues, and that remains a challenge.
Once again, it’s delayed the launch of its first electric vehicle — that luxury car customers probably don’t want anyway. It’s now scheduled for “the latter part of the decade“. Never say never. I suspect this is the board’s favoured timescale.
New-ish CEO Adrian Hallmark remains upbeat as he shifts the group’s focus to “operational execution and delivering financial sustainability”. The company is pinning hopes on its upcoming Valhalla hybrid supercar, expected in the second half of 2025. We’ll see.
Meanwhile, external risks loom. The second Trump presidency could potentially see the US slap 25% tariffs on UK-made vehicles. That would hit Aston Martin hard. Struggles in China, another key market, aren’t helping.
It’s a hugely volatile recovery play
The 10 analysts offering one-year share price forecasts have produced a median target of 135p. If correct, that’s a staggering increase of more than 60% from today’s 84p.
Those forecasts were produced before the latest slump. They won’t reflect last month’s results or the last few turbulent days.
I wouldn’t suggest any sign investor considers buying Aston Martin shares. I’m only holding on because selling my greatly reduced stake would barely cover the trading costs. I jest, but only just.
And who knows? Maybe, just maybe, this could be the start of something. Perhaps Amazon’s Jeff Bezos will buy Aston Martin to match his purchase of the James Bond franchise.
He could certainly afford it. The group’s market cap of just £782m would be small change to him. For the record, nobody has suggested Amazon will buy Aston Martin but hope springs eternal!
Hope can also be expensive, especially the blind type. Blind hope is possibly the only reason to buy Aston Martin shares today. It didn’t work out for me.
This post was originally published on Motley Fool
