Aston Martin share price has come under pressure since its initial public offering as the company has continued burning cash. AML was trading at 64.5p on Monday, down by over 90% from its highest point after its initial public offering. So, is it safe to buy this vehicle stock?
Aston Martin Lagonda is the real burning platform
Tufan Erginbilgic, the highly successful CEO of Rolls-Royce Holdings, described his company as a burning platform shortly after he became CEO in 2023. His view was that the company was incinerating cash at a rapid pace.
Since then, he has turned around the company and made it one of the best-performing players in the FTSE 100 Index. It has also become a company with a valuation of over $128 billion, making it the biggest industrial firm in the UK.
The term ‘burning platform’ is the best one to describe Aston Martin Lagonda, a company that makes popular and highly expensive vehicles, including those of Aston Martin fame.
Data shows that all Aston Martin vehicles sold since 2014 have lost the company money. The average cash lost in this period was about £42,000, meaning that the company has lost over £2.8 billion.
The huge subsidy has been funded by equity and debt. Data shows that the shares outstanding jumped to over 1.01 billion, up from 310 million in 2021.
It will likely need more capital in the coming months, with analysts at JPMorgan predicting that it will burn £360 million this year and £230 million in the first half of last year. JPM sees the company raising at least £200 million in the next few months.
The most recent trading update showed that the company delivered 1,430 wholesale units in the third quarter. These units were much lower than what the company was expecting. It blamed the fall to weaker-than-expected demand from the United States as Donald Trump’s tariffs made its vehicles more expensive.
The management also warned that the company will not meet its target for the year and the fourth quarter.
Its first half results showed that the company’s revenue plunged by 25% to £454 million, while its gross profit and margin tumbled to £126 million and 27.9%, respectively. Its EBIT was minus £121 million, a big drop from the previous £99 million.
Aston Martin stock price technical analysis
The weekly chart shows that the Aston Martin share price peaked at 850p in 2021 to the currently 64.55p. Its attempts to recover found substantial resistance at 395p, its highest point in June 2023.
AML stock has remained below the 50-week and 100-week Exponential Moving Averages (EMA). It has also formed a bearish flag pattern and an inverse cup-and-handle pattern.
Therefore, the most likely situation is where the stock continues falling, with the next point to watch being at 50p. A move above the resistance at 87.75 will invalidate the bearish outlook.
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