The Aston Martin (LSE:AML) share price fell in early trading on Wednesday morning. The stock is up 24% over the last month having recovered from a slump induced by Russia’s invasion of Ukraine. However, the long-term trend for this FTSE 250 stock is not positive, down 50% over the past year.
Wednesday’s fall
The Aston Martin share price fell 4% on Wednesday morning as London stocks dropped in early trade. The Gaydon-headquartered firm was one of the biggest fallers on the FTSE 250 along with Moonpig Group and Dr Martens.
The unsteady start to trading came after Federal Reserve governor Lael Brainard said overnight that the US central bank could start reducing its balance sheet as soon as next month. Brainard added that the Fed was prepared to take stronger action on raising interest rates. San Francisco Fed President Mary Daly also echoed these comments.
The comments raised concerns that the Fed could overplay its hand-in reining in inflation. This could potentially tip the US economy into a recession.
Should I buy the dip?
The Aston Martin flotation must be one of the worst in recent years, falling some 90% since its offering in late 2018. The stock is now trading at 934p a share, hugely down on this time last year and only a fraction of where it was three years ago.
In February, the company posted fairly positive 2021 results, with a narrowing of its full-year losses as sales surged. Pre-tax losses reduced to £213.8m from £466m the year before, when the company suffered during the height of the pandemic.
The turnaround was driven by a sharp increase in revenue, up 79% to £1,095m. The jump was largely attributed to substantial volume growth, driven by customer demand, and strong pricing dynamics. Sales were up 12% on a two-year basis.
The supercar manufacturer insisted that this was achieved despite a difficult operating environment. It added that the year concluded with dealer stock at optimum levels.
The company has strong growth objectives too. In 2021, it shipped 6,600 cars to its dealers. But by 2024/25 executive chairman Lawrence Stroll hopes to increase this number to 10,000 cars per year.
Aston Martin said the results showed it is on its way to achieving its 2024/25 goals, including £2bn in revenues and £500m in adjusted EBITDA.
While the objectives look great, the company’s debt is one issue. The group reported net debt of £892m in 2021. Coupled with high interest rates on its loans, this could really impact its capacity to turn a profit.
I’m a huge fan of the brand and do have a limited number of shares in the company, but I don’t intend to buy more as I’m concerned about its capacity to hit its goals. I don’t see the share price exploding any time soon.