Can Mercedes-Benz reverse sell rating on Aston Martin shares?

Though the stock has fallen steeply since January, with Mercedes-Benz recently upping its stake in the company, could the tide be turning for Aston Martin?

For many, Aston Martin is still regarded as one of the leading luxury car manufacturers in Europe. However, its stock market performance has been anything but vintage in recent years. When former boss Andy Palmer took the company public in 2018, it signalled a turning point in the company’s history and not a positive one.

Are Aston Martin shares still a car crash?

In a recent interview, Palmer said he doesn’t regret the decision he made and urged Aston Martin shareholders not to ‘look back in anger’. His message to This is Money was that his era is over, and the car company is now moving in a new direction. That’s certainly true. Following a net loss of £126 million in 2019, Aston Martin shares tanked.

From a financial perspective, things haven’t been much better this year. A hangover from 2019’s failings dripped into the new year and were compounded by COVID-19 halting production. Indeed, the 'macro uncertainties' that hurt trading conditions between the UK and Europe last year haven’t abated. What’s more, poor sales figures for the Vantage in 2019 haven’t been offset this year due, mainly, to a fall in trade caused by COVID-19.

This bleed over from 2019 into 2020 means Aston Martin is expected to post an annual loss of £250 million. Given the bleak past, it’s hardly surprising Aston Martin share price charts haven’t made for positive reading over the last 12 months. From a high of 175.80p in November 2019, Aston Martin shares are now hovering around 70.00p. But, within the negatives, there have been some positives and, as Palmer noted, the company is moving in a new direction.

Mercedes-Benz joins Aston martin in the driving seat

Mercedes-Benz now has a 20% stake in Aston Martin. That’s up from 5% and means Mercedes-Benz will not only have greater input into Aston Martin’s overall direction but open up new opportunities on the electric front.

The UK government has brought forward its ban on petrol and diesel cars to 2030, which means Aston Martin needs to be in the driving seat when it comes to electric technology. Its partnership with Mercedes-Benz will facilitate that. Moreover, it could help Aston Martin shares. Goldman Sachs analysts issued a sell rating with a PT of 49.00p in October. Since the start of November, Aston Martin share price charts have shown gains of 54%.

The 79.00p barrier was breached on November 18 and, despite a move back down to 73.00p, there appears to be a much greater sense of optimism than there was. COVID-19 vaccines mean production should be back somewhere close to full capacity in 2021 and a new business plan targeting revenue of £2 billion are both positives. Add to this a better deal with Mercedes-Benz and there are plenty of positives for Aston Martin's near future.

What’s your view on Aston Martin...

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