Image source: Aston Martin
The Aston Martin Lagonda (LSE: AML) share price put in a strong rally in the first half of 2023. But it soon turned tail, and it’s since been pretty much down all the way. It looks like things could be about to get worse.
The company released its latest profit warning on 6 October. Since the announcement, the share price is down 11.6%. That’s as I wrote this, just before the market closed today (7 October) — I won’t try to guess what tomorrow might bring.
This time it’s all about “heightened challenges in the global macroeconomic environment, including the ongoing impact of tariffs.”
The company expects wholesale volumes for the 2025 full year to “decline by [a] mid-high single-digit percentage” from 2024. As a result, adjusted EBIT for the year should come in below the lower end of market consensus. And that suggests a loss of more than £110m. The board “no longer expects positive free cash flow generation in H2 2025.”
It doesn’t take a genius — and I’m not one — to work out that’s the exact opposite of what Aston Martin needs to see as it continues its painful turnaround attempt.
Cash preservation
And yet again, the focus is on the pennies, as “management has initiated an immediate review of future cost and capital expenditure.” Full-year capital expenditure had previously targeted around £400m, now scaled back to an expected £375m.
The board did say it “expects FY 2026 profitability and free cash flow generation to materially improve compared with FY 2025.” But haven’t we heard things like that before? I’m sure I read something similar last year, talking about this year.
Third-quarter results are due on 29 October — and I think it might pay to be prepared.
Brand power
A key factor I’m reading about is the suggestion that the Aston Martin brand just doesn’t have the pricing power of other luxury marques. Coupled with the growing influx of high-quality and attractively-priced sporty electric vehicles from China, it’s looking like Aston Martin has a battle on its hands — just to survive.
In fact, it seems likely the company will need some refinancing to see it through to that hoped-for positive cash flow — which, remember, is coming any year now.
And that’s where I do actually see some hope. Aston Martin has been in this kind of position a number of times since IPO in 2018. And each time, it found the cash. Will financers see this year being negotiated successfully? Can they believe the jam really is coming tomorrow? They might be ready and willing to stump up what’s needed again.
Turnaround, finally?
And if Aston Martin can sail into less choppy waters in 2026, investors who take the risk and buy now might do very well if and when the cash finally starts to flow inwards.
But that risk looks like a big one to me. And I think investors should consider waiting to see if the company can steer itself through this latest crisis first.
This story originally appeared on Motley Fool
