The Aston Martin share price has crashed to a record low as investors doubt the turnaround strategies by Lawrence Stroll. Shares of the iconic British car brand have dropped to a record low of 388p, which is about 97% below its record high. As a result, the company’s market cap has crashed to over 481 million pounds.
Fall from grace of a British icon
The automobile industry is going through rapid change. For one, Tesla, a 20-year-old firm has grown to become the most valuable firm in the industry.
The luxury car segment has been in a strong growth in the past few years as the number of wealthy individuals surge. Some of the top players in this industry are Porsche, Ferrari, McLaren, and Aston Martin.
While Aston Martin is a highly beloved company, its business performance has been wanting. Its revenue growth has been relatively weaker than its peers. In 2021, the company’s revenue rose to $1.48 billion, which was slightly above the 2019 high of $1.28 billion. Its annual losses have surged to over $340 million.
In the same period, Ferrari’s revenue rose to over $4.8 billion while its total net income jumped to over $948 million. The same is true with Porsche, the company that is partly owned by Volkswagen.
At the same time, Aston Martin’s Formula 1 team has been disastrous. The team currently stands at position 9 with just 18 points. It has been beaten by Haas, a team that did not make any points in 2021.
Why has Aston Martin crashed?
There are several reasons why the Aston Martin share price has crashed. First, the company has a significantly weak balance sheet in order to compete with other well-funded firms. It is estimated that the company currently needs more than 200 million pounds to safeguard its future.
Most of these funds will likely come through expensive debt or external equity sources. Analysts believe that Saudi Arabia’s Public Investment Company.
Read more on why the Tullow Oil share price has plummeted.
Second, it is clear that Lawrence Stroll’s involvement has not helped the company. As you recall, the Canadian billionaire and his friends invested 500 million pounds with the goal of revamping the balance sheet and boosting its production. While a lot has improved, the company has faced significant production bottlenecks. As a result, it has had three CEOs in the past three years.
Finally, there are increased odds that the company could go bankrupt unless something major happens. For one, the firm has over $1.1 billion in high-interest bonds that will need to be paid by 2025 and 2026. Making these payments is almost impossible considering that the firm has been making substantial losses in the past few years.
Aston Martin is an iconic brand, one that many private equity or high net-worth individuals would want to own. However, it is unlikely that anyone of them will make a bid because of the significantly high debt burden. Such a buyer might want to wait for the company to go bankrupt and buy it cheaply.
Aston Martin share price forecast
The daily chart shows that the Aston Martin stock price has been in a strong bearish trend in the past few months. In this period, the stock has managed to move below the important support levels at 893p and 566p. It remains below all moving averages while the Relative Strength Index (RSI) has moved below the oversold level.
Therefore, the AML share price will likely continue falling as bears target the key support at 350p. A move above the resistance at 566p will invalidate the bearish view.