Aston Martin’s (LSE:AML) share price is now (16 March) below 40p. It’s astonishing that the British icon, which floated its stock at £19 in October 2018, has lost so much value.
However, could it recover? Or might the group’s shares fall further still? Let’s see.
Some mistakenly believe that a falling share price is a sign of imminent bankruptcy. In reality, a share price is a judgement as to how much a company’s worth. In simple terms, it’s an opinion, albeit one that’s determined by thousands of interactions of buyers and sellers.
Even if Aston Martin’s market cap went to £0, it doesn’t mean the group will go out of business. This will only happen if it’s unable to meet its day-to-day obligations to pay its staff and suppliers. And despite its recent troubles – looking back to 2015, it’s only reported one annual profit — there’s no indication this is likely.
|
Year |
Cars sold |
Revenue (£m) |
Net profit/(loss) (£m) |
|---|---|---|---|
|
2015 |
3,615 |
510 |
(107) |
|
2016 |
3,687 |
594 |
(148) |
|
2017 |
5,098 |
876 |
77 |
|
2018 |
6,441 |
1,097 |
(57) |
|
2019 |
5,862 |
981 |
(118) |
|
2020 |
3,394 |
612 |
(411) |
|
2021 |
6,178 |
1,095 |
(189) |
|
2022 |
6,412 |
1,382 |
(528) |
|
2023 |
6,620 |
1,633 |
(227) |
|
2024 |
6,030 |
1,584 |
(324) |
|
2025 |
5,448 |
1,258 |
(493) |
But persistent losses have to be funded. The necessary cash to continue trading must come from debt, existing shareholders, or new investors. Almost inevitably, there comes a point when these stakeholders start to lose patience and refuse to stump up. At this point, a decision has to be made. Either a new buyer is found or the company in question will cease trading.
Personally, I can’t see Aston Martin losing all support. Due to its prestigious brand, beautiful products, and rich motoring history, it’s the type of business that will always be wanted by someone.
And with a market cap of around £400m – not far off its accounting value of £329m (at 31 December 2025) — I suspect a number of potential buyers are eyeing up the opportunity to become involved.
Whenever a takeover bid’s announced, it’s often the case (no guarantees) that a potential buyer will have to pay more than the current market price to secure full ownership. But buying shares in the hope of a takeover isn’t a great idea. After all, one might not materialise or it might come at a bargain basement price.
And a fundamental problem with Aston Martin is it’s difficult to know what it’s worth due to its losses. It needs to sell more cars. Cutting costs and operational efficiencies will help its bottom line to some extent, but a boost to its financial performance can only come about by persuading more people to buy its cars.
