It is a cultural symbol; any James Bond fan will attest to that. When the chief executive says “A Bond movie is always a boost to us,” you know Aston Martin and the iconic movie franchise are joined at the hip. But CEO Andy Palmer can afford only a quiet chuckle at the trailer of an upcoming Bond movie, as I believe Aston Martin Lagonda Global Holdings (LSE: AML) has big problems facing it.
From the time the stock debuted on the London Stock Exchange in October 2018, it has never seen a price level higher than its listing at 1,900p. Its financial performance has been dismal as the company has struggled to generate profits on a quarterly basis. As of December 21, the stock is down 57% for the year; it saw its nadir at the end of October when it dipped below 400p. But since that time, the share price has been on a broad uptrend.
A new driver?
According to a report by Autocar, billionaire businessman Lawrence Stroll may be assembling a consortium to buy a large stake in Aston Martin. While Palmer, understandably, declined to comment, the stock price received a boost on hopes of a takeover. Though Stroll has an association mostly with fashion brands, he does have a foot in the auto business by means of owning Racing Point, a Formula 1 team.
Market participants were quick to point out the potential synergies that can be tapped between his team and Aston Martin, and the fact that his son – Lance – races for the team. It could be a good look for the luxury car maker and may breathe new life into the company.
On the other end of the spectrum were concerns regarding whether Stroll would be able to turn the ailing carmaker’s fortunes around. His lack of experience in the automotive business, as well as the fact that Aston Martin is the title sponsor for the Red Bull Racing team (which will be an issue if Stroll takes the former over at this time) were among the chief worries.
However, in general, stock markets were relieved that Aston’s share price was rising.
Get set… Wait?
It is not a given that Stroll will take over Aston Martin. It is not even certain the extent to which stakeholders in the carmaker would be ready to cede control. At this juncture, the company is betting on its upcoming luxury SUV – the DBX – to turn its financial situation around.
If a stake sale does go through, it will relieve current shareholders of the company. But what about potential investors? Given the recent uptrend, it may be time to get in on the stock – but in a measured manner. As per my understanding, there are not enough signs to go all in and buy the stock. However, there are some green shoots and in my opinion the price level of around 450-480p may present a compelling proposition to buy a small amount.
Thus, at this stage, I believe you may consider sitting in the passenger’s seat; the case for taking the driver’s seat, though, is not compelling enough.