Aston Martin Lagonda’s share price remains under pressure this week, hovering at its lowest level since March. AML shares have plunged 44% this year and are down 94% over the past five years. The stock’s decline could continue as the company grapples with persistent losses and mounting pressure on its balance sheet.
Aston Martin Lagonda is facing major risks
Aston Martin, one of the best-known companies in the luxury vehicle industry, is facing some major risks that may affect its future.
The most recent results showed that its wholesale volume dropped by 1% in the first quarter to 939. This decline was offset by higher vehicle prices, which helped to push its revenue up by 16% to £270 million.
The company is losing money for all vehicles it sells. Its net loss came in at £65.5 million, an improvement from the £79.6 million it lost in the same period last year. Aston has never made a profit since going public in 2018.
Meanwhile, the company’s debt load has continued growing. Its last results showed that its net debt soared to over £1.459 billion in Q1 from £1.26 billion in the same period last year.
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Aston is raising more debt
The company is now working to increase its debt load, with existing creditors becoming jittery. It is talking with HPS, a company that BlackRock acquires in a $12 billion deal. This deal will be backed with the company’s assets that have been moved out of reach of existing creditors, an arrangement known as a “drop-down” structure.
The capital raising is happening at a time when its creditors have brought in Jefferies as an advisor. These creditors are concerned about the company’s financial position and worried that another debt financing may leave them more exposed to potential losses.
Aston Martin Lagonda has been in a fundraising spree, raising cash from Yew Tree Overseas. Yew Tree is a consortium that Lawrence Stroll leads. Stroll has also invested in the company directly.
Other investors are Saudi Arabia’s Public Investment Fund (PIF), Mercedes-Benz, and Geely. It even sold its minority equity stake in the Formula 1 and its naming rights.
Despite all these investments, it has failed to turn a profit and has struggled with product delays and quality problems.
The company is also facing substantial competition issues, especially in China, where local firms are building comparable vehicles.
A potential catalyst for the stock would be a buyout by either one of its investors, a private equity company, or another vehicle manufacturer. While no deal has been announced, its market capitalization of about $480 million and enterprise value of less than $2 billion would make it a good purchase.
Aston Martin share price technical analysis
AML stock has been in a freefall and is hovering near its all-time low. It has remained below the 50-day moving average. It is also hovering at the lowest level in March this year.
The Relative Strength Index (RSI) has dropped below the neutral level of 50 and is pointing downwards. Therefore, the stock will likely continue falling in the near term.
If this happens, the next key target to watch will be the psychological level of 30p, followed by 25p.