Is Aston Martin worth 36p a share?

We examine why analysts in the second quarter of the year have downgraded Aston Martin’s share price target to an average of 36p and if the struggling luxury car maker could beat expectations or fall even further.

Over the last three months, analysts have downgraded Aston Martin Lagonda’s share price target to an average of 36p after the luxury car maker suffered a major slump in sales amid the coronavirus pandemic – implying a potential downside for the stock of -26.5%.

Aston Martin closed at 49p per share on Thursday, with the stock down 71% year-to-date.

The already beleaguered Aston Martin has had to contend with the coronavirus strangling its revenues this year, with the company losing £119 million in its first quarter (Q1), only for it to announce that sales will be lower than expected in its second quarter (Q2) of trading too.

However, the luxury car maker’s new executive chairman Lawrence Stroll remains confident in the company’s multi-year plan that looks to build on its unique brand.

‘We have taken decisive action to improve the cost efficiency of the company, in alignment with reduced sports car production levels, and are focussed on cost and investment control consistent with restoring profitability,’ Stroll said in a statement on Friday.

‘Today we announce further steps to improve financial flexibility in a period of ongoing uncertainty with this additional funding to execute the business plan,’ he added.

Aston Martin is scheduled to unveil its half-year results on Wednesday 29 July.

Aston Martin: technical analysis

Shares in Aston Martin Lagonda have been hit hard both pre and post-crisis, with the May-June rebound coming under pressure once again.

The daily chart highlights the recent grind lower, with the stock losing 44% since the 9 June peak alone, according to Josh Mahony, senior market analyst at IG.

However, looking back at recent months, the shift in momentum could provide the basis for some upside given the recent stochastic decline into a deep oversold position.

‘Looking at the previous rebounds from oversold conditions, we have often seen the price post a brief surge before resuming the downtrend once again,’ Mahony said. ‘With that in mind, a break through the 20-threshold could provide a similar period of upside.’

‘Nevertheless, the trend remains bearish until we start to break out of the continued pattern of lower highs,’ he added. ‘Thus further downside looks likely unless we see a break through the likes of 77.4p and 88.5p.’

Stroll shakes up Aston Martin management

Since acquiring a significant stake in the luxury car maker, billionaire owner Stroll has made some significant changes to its management team.

Former CEO Andy Palmer was shown the door back in May with Stroll favouring Mercedes boss Tobias Moers to take the helm at Aston Martin in August.

Earlier this week, Aston Martin said that it will bring in ex Jaguar Land Rover chief financial officer Kenneth Gregor as its new CFO.

‘Our energies and those of the whole Aston Martin team will be focused on building a stronger business for our customers, our employees, our strategic and other partners and our shareholders and enabling Aston Martin to return to being one of the preeminent luxury car brands in the world,’ Stroll said.

How to trade stocks with IG

Looking to trade Aston Martin and other UK stocks? Open a live or demo account with IG and buy (long) or sell (short) shares using derivatives like CFDs in a few easy steps:

  1. Create an IG trading account or log in to your existing account
  2. Enter ‘Aston Martin Lagonda’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

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