Wednesday, December 6th 2023

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Is This A Precourser For Wolff To Join Stroll At Aston Martin?

Aston Martin enjoyed a welcome, and much-needed, boost on the stock market this week after the luxury car firm announced the appointment of a new chief executive and a board shake-up. But the company’s share price still stands at a fraction of its level when it floated on the London Stock Exchange in the autumn of 2018 – falling from £19 to 58.5p on Thursday this week.

The world-renowned company – famous for making James Bond’s favoured car – currently has a stock market value of less than £800m (for comparison, Tesla’s market cap is around $150bn). With new management in place, is now the time to buy into Aston Martin?

What’s gone wrong for Aston Martin?

In October, Aston Martin Lagnonda Global Holdings announced it was floating on the LSE with an offer price of £19 a share – valuing the iconic company at £4.3bn. Despite having a shaky financial history – the company has gone bankrupt seven times in its 107-year-old history – investors piled in.

However, the venerable brand saw its shares fall immediately by nearly £1 on their first day of trading. By February 2019, when the firm posted an annual loss of £68m in 2018 following a profitable 2017, its shares were down to £10.80.

A series of downgrades and more disappointing figures in the following months sunk Aston Martin’s share price further. Brexit concerns were also weighing on the European car market throughout this period, while the coronavirus crisis in recent months has made things worse.

What’s its current status?

In need of a cash injection, Aston Martin was forced into making a rights issue – for which it dropped the price from 207p per share to 30p – that completed in April. 

Under the deal, Canadian billionaire Lawrence Stroll led a consortium that took a 25 per cent stake in the business. As part of the agreement, Stroll became executive chairman. 

This week, just over after a month after Stroll’s arrival, Aston Martin chief executive Andy Palmer – in his position since 2014 – left the company. 

He will be replaced by Tobias Moers, currently the boss of Mercedes-AMG, on 1 August. On his appointment, Moers said: “I believe that there is a significant opportunity to harness the strengths of the business to successfully deliver the planned product expansion and brand elevation.”

So is it time to buy?

Aston Martin’s share price has soared since the company announced its chief executive changeover – from 35.5p at the end of last week to 58.5p on Thursday.

So could now be a time to buy in? Most analysts have yet to form a new take on Aston Martin following this week’s news. 

Investors are clearly pleased with Palmer’s departure, but it is too soon to tell how much this will improve the company’s overall performance. 

Bloomberg Intelligence analyst Michael Dean has said that Moers’ appointment should boost confidence in the company before the crucial rollout of its new DBX SUV in July. He also believes the move should “solidify” Aston Martin’s relationship with Mercedes.

However, Motley Fool analysts do not appear convinced. 

Writing on Wednesday, Alan Oscroft expressed fears that Aston Martin will face more issues in the future – and may even require more funding – and said he was “steering clear”. 

Anna Sokolidou said that although Aston Martin’s shares may have been unfairly depressed during the Covid-19 crisis, they still appear “too risky and there are many other safer alternatives”.

Overnight Speculation!

Speculation has been growing that Toto Wolff could partner Lawerance Stroll at Aston Martin. At present Stroll owns 25 percent of Aston Martin and, as of next season, his Racing Point team will be rebranded under the British carmaker’s moniker.

Toto Wolff also indicated his intention to step down from Mercedes F1 team, this has left F1 fans further speculating of both Wolff and Hamilton’s future who is also yet to re-sign for Mercedes.

The author was remunerated but does not hold shares in the company