I wasn’t expecting to write about a double-digit rise for Aston Martin Lagonda Global Holdings (LSE: AML) any time soon. But that’s what happened, as the Aston Martin share price ended Tuesday with a 28% jump. And, as I write on Wednesday morning, the price is up further, for a 38% leap in less than two days.
To Aston Martin shareholders, it’s a welcome change that can’t have come too soon. Aston Martin is one of the biggest stock market casualties of the Covid-19 crash, losing more than 70% by last week. And, looking further back, the picture is even worse. The Aston Martin share price had crashed by a staggering 92% since flotation, in less than two years.
Good news at last
The reason for the latest rebound? On Tuesday, the company announced the departure of chief executive Andy Palmer, effective immediately. There’ll be a brief interim period under the guidance of chief manufacturing operations officer Keith Stanton. After that, on 1 August, Tobias Moers, CEO of Mercedes-AMG, will take the reins.
Does this mean the troubles could be over and the Aston Martin share price is now too low? It very possibly could be. But Moers has a challenging task ahead of him, to say the least. The coronavirus pandemic certainly made the outlook for Aston Martin seem even more bleak. But even before that, turning the company round was never going to be easy.
Sector woe
The news of the new boss’s appointment came on the same day that McLaren announced cutbacks and redundancies. McLaren has been hit on two fronts. Firstly, its sales have been falling due to Covid-19. And its advertising revenue has been impacted too, as the lockdown rules have halted sporting activities.
But maybe the news of a new boss has come at the best possible time, when things were looking their darkest. I think there’s a very good chance of an improvement in demand when the Covid-19 threat recedes and the FTSE 100 crash looks to be over. And, on that basis, I’m tempted to think the Aston Martin share price has been unfairly depressed. The market might have got the balance between risk and potential reward wrong, and the outlook could be too pessimistic.
Aston Martin share price
But two things put me off the Aston Martin share price right now. One is that we might not have seen the end of the FTSE 100 slump. I fact, I think there’s a strong possibility we might suffer a second stock market crash in the coming months.
Then there’s the long-term outlook for Aston Martin. I still see a lot of problems facing the company, and I don’t see a quick fix. It will surely be a long battle to turn Aston Martin towards profit, and financial pressure isn’t going to go away. The firm did pull off a successful rights issue in April, but at the cost of diluting existing shareholders. I fear Aston Martin will need more new funding in the coming years.
As the long term is what I really care about, I’m steering clear.