Might Saudi money infusion at any point push Aston Martin share cost?
Saudi Arabia’s Public Investment Fund is in talks with Aston Martin Lagonda (AML) about taking a stake in the UK luxury motor manufacturer.
Aston Martin is facing the challenge of funding its next generation of sports cars, and its first push into electric vehicles, the business is saddled with debt and producing no net cash. It’s share price has been down 68% this year and 40% this month. So, can the Saudis bring the Aston Martin share price back to life?
Iconic British car marker, Aston Martin (AML) – which is popular with the fictional character James Bond, may be becoming a little shaken and stirred by its financial issues. Founded in 1913, Aston Martin (AML) is one of the most shorted stocks on the London Stock Exchange (LSE).
“The company has been a disastrous investment since joining the stock market and anyone looking to back the company now would no doubt want a great deal to compensate for the risks involved,” Russ Mould, AJ Bell investment director wrote in a note.
A report in the Financial Times last week, claimed the Saudi’s are prepared to take a stake in Aston Martin (AML), and it could be worth £200m ($243m). According to the report, Aston Martin’s chairman and owner Lawrence Stroll has close ties with Saudi Arabia through his F1 team’s deal with Saudi Aramco.
Could Aston Martin share price propel?
Despite Aston Martin’s share price plummeting on the news it may be getting investment from the Saudi’s, Stroll has ambitious plans and wants to increase car production to 10,000 cars per year by 2024/25, an increase from its 2022 aim of 6,600. The chairman also wants to achieve £2bn in revenues by 2024/25.
For its first-quarter results, which were released in May, revenue rose 4% to £232.7m, reflecting price increases. This offset the expected decline in volumes, as the group prepared for its luxury SUV, DBX707 production.
There was a greater proportion of specials (custom made cars) sold, which are higher margin. Together with cost cuts, it meant underlying cash profits (EBITDA) rose 18% to £24.4m.
However, in 2022 Aston Martin (AML) continues to expect underlying cash profits to increase by 50% as it sells over 6,600 vehicles.
Laura Hoy, Equity Analyst at Hargreaves Lansdown told Tradexone.com: “The business behind James Bond’s sleek supercars has been anything but polished over the past few years, and with a new strategy in place, the market’s hoping that it’s new CEO, Amedeo Felisa can pick up the pace.”
In April, Aston Martin (AML) announced it would release its first electric car, however, as Hoy points out the group has been “slow off the mark” when it comes to producing an electric vehicle.
“Luckily, Aston Martin’s customers aren’t overly concerned with the rising price of fuel and will hardly notice the cost-of-living squeeze. That means the group’s still expecting to meet its goal of selling 6,600 cars this year. Reaching that target rests heavily on the new DBX’s reception, as the group will need to make up for falling short of the 1,650 cars needed each quarter this time around,” Hoy concluded.