The Aston Martin (LSE: AML) share price slumped below 100p at the beginning of April. Shares in the luxury carmaker have struggled to return to this level ever since.
However, following the company’s recent refinancing and restructuring, I think there’s a strong chance the stock could break above this level in the medium term.
Aston Martin share price performance
2020 has been somewhat of a transformational year for Aston Martin. The coronavirus crisis hit the group like a sledgehammer and management had to act quickly to stabilise the business.
These efforts seem to have put the company on a firm footing. Its balance sheet is more robust than it was at the beginning of 2020 and the organisation has reduced costs. These efforts should make it easier for the group to return to profit.
The next few months will be vital for the business and the Aston Martin share price. Its new CEO, an industry insider who was previously at Mercedes, is focusing on selling cars, rather than filling showrooms.
To this end, the company has been selling off vehicles at lower prices to reduce inventory. While this will impact profits in the near term, I think the strategy is sensible from a long-term perspective.
Producing a limited amount of vehicles may result in higher selling prices and more demand. This could help fuel the company’s turnaround.
Aston Martin is also planning to release its much-anticipated DBX sports utility vehicle soon.
The company has invested a significant amount in this vehicle. Delays to production have incurred large losses in recent years. Its launch will finally provide much-needed cash flow for the group. I reckon when sales start to roll in, the Aston Martin share price could jump.
As well as the DBX, the luxury carmaker is planning to start deliveries of its £2.5m Valkyrie hypercar next year. This is the most expensive road car in British history and when deliveries start it should also provide some much-needed income for Aston Martin.
Getting back on track
All of the above seems to suggest to me that after several years of underperforming, the Aston Martin share price could really wake up over the next few months.
As the sales of its highly anticipated DBX get under way, the group may be able to reduce some of its massive debt load. Valkyrie sales could also provide cash to help stabilise the balance sheet.
That being said, the company isn’t totally out of the woods. A second wave coronavirus could set back its recovery plan, and there’s no getting away from the fact that the business is drowning in debt.
As such, I think it could be best to own the stock as part of a diversified portfolio. This would allow investors to profit from any recovery in the Aston Martin share price while benefiting from upside growth when the recovery starts to accelerate.