Why Investors Should Give Aston Martin a Fresh Look
For most consumers, Aston Martin is James Bond’s car in Goldfinger. But after a stint as a unit of Ford Motor , followed by ownership by a private consortium and years of losses, Aston Martin Lagonda Global Holdings went public in London in October, only to see the shares crash.
Now, Aston Martin Lagonda (ticker: AML.UK) is on a mission to prove doubters wrong, and all of the signs indicate it’s on the right road. The firm, which dates back to 1913, plans to bring out seven models in seven years, all with a seven-year life cycle. Three have already arrived, and of the four remaining, one will be the company’s first-ever sport-utility vehicle.
The car maker operates in the ultrapremium end of the car market. At last week’s Geneva International Motor Show, Aston Martin revealed its newest models. Its electric Lagonda All-Terrain Concept allows it to play in the same market as Tesla, but at a much higher price. And its twin-turbo V6 AM-RB 003 Hypercar, which retails at a cool million pounds ($1.17 million) will enable it to complete head-on with Ferrari (RACE), Rolls-Royce, and McLaren Automotive in the mid-engine market.
“The company has been professionalized over the past four years,” Tim Rokossa, an analyst at Deutsche Bank, wrote in a November note. “The new management team has vast industry experience, a successful track record, and ambitious plans.” In February, he reiterated his target price of £20 and rated the stock a Buy.
Results are looking up. Last month, Aston, which sold just over 6,441 vehicles in 2018, posted full-year results that saw volumes rise 26% and revenues increase 25%. In 2018, its margin of earnings before interest, taxes, depreciation, and amortization, or Ebitda, was 22.6%, and it has given guidance of 24% for 2019, and long-term guidance of 30%. This would put it on par with Ferrari, which posted a 32.6% Ebitda margin for 2018. Aston’s shares on Friday closed at £11.41 with a four-quarters forward price/earnings ratio of 26, which compares with 31 for Ferrari, and 21 for the luxury goods sector.
Aston Martin benefits from a superwealthy customer base that’s less affected by economic cycles and geopolitical crises. “Insulated rather than immune,” says Aston Martin CEO Andy Palmer, adding, “I think we’re still on a development path, so we’re not all the way there yet.”