Image source: Aston Martin
Aston Martin Lagonda (LSE:AML) shares have remained stuck in reverse over the last year. The FTSE 250 carmaker now deals at 70.2p per share, a whopping 59.5% lower than it was 12 months ago.
Someone who bought £10,000 worth of shares would have seen the value of their investment tumble to £4,046. They wouldn’t even have received any dividends to help soften the blow, either.
Aston Martin’s share price sits significantly below the 661.9p it was at five years ago. But past performance is not always a reliable guide to the future, and investing in the luxury carmaker today could yield sterling returns if it recovers.
So should investors consider buying Aston Martin shares today?
Tough times
It’s easy on one hand to see the company’s incredible appeal. Its products are the epitome of style, speed. sophistication, and let’s face it, sex appeal.
Aston Martin’s association with James Bond since the mid-1960s — and the brand’s involvement in the dynamic world of Formula One — haven’t done it any harm, either.
But while its label and products are highly desirable, the same certainly can’t be said for the company itself, at least in my view. So what’s the problem?
The issue is that Aston Martin is fighting fires on a number of fronts. Last year, pre-tax losses rose by 21% to £289.1m, partly due to a 9% drop in wholesale volumes. Sales declined on the back of supply chain disruptions and tough conditions in China, troubles that still persist.
As a result, net debt — which was already pretty concerning at 007’s favourite carmaker — shot up sharply. At the end of 2024, Aston had net debt of £1.2bn, up 43% year on year. The spectre of fresh rights issues and debt issuances still looms large.
Tariff talk
As if Aston Martin didn’t have enough problems, on Thursday (27 March), US President Trump drew global carmakers further into his escalating trade battle.
From 2 April, the US will slap a 25% tariff on all imported cars, putting a hefty premium on already-expensive marques like Aston.
On the plus side, delays to previously announced tariffs from the US may suggest this thumping import tax isn’t a done deal. In addition, UK chancellor Rachel Reeves has said the government is “in intense negotiations” with Washington to avoid any car tariffs.
But just the mere threat of trade tariffs is enough to chill my bones. Last year, sales to the Americas — dominated by demand from US customers — accounted for 40% of group revenues, making it by far the company’s single largest market.
With all of its manufacturing located in the UK, Aston Martin would be especially vulnerable to any ‘Trump Tariffs.’
What next?
It’s hoped that a string of new car launches (including the recently revamped Vanquish and the upcoming Valhalla) will revive the company’s fortunes. But the highly competitive nature of the car market means success is by no means guaranteed.
And Aston Martin’s recovery is made even more difficult given challenging economic conditions in key markets. On balance, this is a FTSE 250 share I think investors should consider steering well clear of.
