When a colleague told me earlier this week that the Aston Martin (LSE:AML) share price is down 94% over the past three years, I couldn’t quite believe it. Sure, I remembered the slightly overpriced IPO level of £190 back in 2018. Yet I didn’t realize quite the extent of the slump since then. With the current share price at just 1,371p, it is now time to buy?
Reasons to like AML
In the latest results that came through in November, there were plenty of reasons to be optimistic about the brand. The headline statement was that top line revenue had almost trebled. This was in comparison to the same nine month period from 2020.
Even when filtering this down to the bottom line, adjusted EBITDA came in at £72.6m. Considering the business posted a loss of over £100m over the same period last year, this is a major improvement.
Based on those figures, Aston Martin expect to hit their full-year guidance. This will make investors pay more attention and add validity to guidance for 2022 and beyond. So if we see an upbeat trading update in this way, then the Aston Martin share price should see some uplift.
Another reason to be optimistic is when considering the pipeline. The transformation process is ongoing, with exciting releases such as the Valkyrie AMR Pro, the Valhalla hybrid and the DBX derivative. If these cars are a small taste of what to expect over the next couple of years, then the Aston Martin share price should have upside.
Risks remains for Aston Martin shares
On the other hand, there are clear reasons for why the share price has been hit hard. The pandemic saw the UK fall into a recession. Economic history teaches us that during a recession, luxury goods tend to have the most elasticity of demand. What this means is that I’m far more likely to cut back on spending on luxury items (such as supercars) rather than essentials.
So looking forward, if we see omicron develop to be a serious issue globally (more so than already), then Aston Martin shares could suffer. I think people need certainty before they would want to commit to a purchase. After all, what’s the point of buying an Aston if we go into another lockdown for several months?
Aside from this, there’s also concern over board management. Changes at the top are seldom taken well by the market. Only last week, the CFO announced his stepping down for personal reasons. If there’s one man that’s part of the key team to helping Aston Martin deliver on results, it’s the CFO. It’s no surprise then that shares fell after the news was released.
Overall, we do think that the Aston Martin share price will be higher than current levels when looking out over the next couple of years. However, this doesn’t rule out further downside potential in the short-term, depending on Covid-19.
AlphaPicks does not own a position in AML. To trade shares, register here with our preferred partner, EToro.