Luxury sports car maker Aston Martin’s shares experienced a sharp decline in the first quarter of the year, resulting in unexpected losses. However, analysts believe that despite this setback, the company’s long-term strategy remains intact. The company reported adjusted pre-tax losses of £111 million in the first quarter, compared to £57 million in the same period last year, with sales dropping by 10% to £268 million.
Following the news of the losses, Aston Martin’s shares initially dropped by 14% but managed to recover half of the losses. The shares continued to show weakness, closing at £1.36 on Thursday, down by 1.7%. The company’s shares had seen better days, reaching £4 last August. Despite the disappointing performance, Aston Martin remains optimistic about the future, expecting improvements in the second half of the year as deliveries of new products, such as the V12 flagship sports car, ramp up.
Aston Martin has faced challenges with software problems affecting deliveries, resulting in a 26% decrease in deliveries in the first quarter. The popular DBX SUV saw a decline in deliveries by 250 units as buyers awaited an expected face-lift. Chairman Lawrence Stroll reassured investors that the software issues have been resolved, and the company is moving forward with its plans to boost sales and profitability.
The company’s near and medium-term forecasts include raising annual sales to £2.5 billion within four years and achieving EBITDA of £800 million. Despite the losses, the new model pipeline, including an upgraded DBX, has garnered some positive attention. Analysts like Charles Tennant acknowledge the challenges Aston Martin faces but see potential in the new models being introduced later this year. Tennant expressed concerns over the drop in sales of the DBX SUV but noted that the new models could stimulate demand.
Bernstein Research analyst Harry Martin maintained that the buying case for Aston Martin remains unchanged despite the challenging quarter. He believes that a stronger model lineup in the second half of the year and the appointment of a new CEO, former Bentley leader Adrian Hallmark, will drive higher selling prices and profit margins. However, concerns remain regarding Aston Martin’s execution track record, the drop in DBX demand, and liquidity issues.
Looking ahead, analysts and investors are eager to see improvements in free cash flow progress and solid news on manufacturing delays. While the arrival of a new CEO is seen as positive news for the company, the delay in releasing battery electric cars until 2026, focusing on plug-in hybrids instead, is viewed as a prudent move. Despite the challenges Aston Martin has faced, the company managed to reduce losses in the previous year and remains focused on its product lineup, which includes iconic models like the Vantage, Valkyrie, and DBX.
