Image source: Aston Martin
Aston Martin (LSE:AML) shares the same air of cool, glamour, and sophistication as British superspy James Bond. But while 007 always finds his way out of danger, the maker of his favourite cars remains stuck in a seemingly endless crisis.
Aston Martin’s share price has collapsed 95% over five years, to 36.34p. And unlike one of Bond’s ricocheting bullets, the FTSE 250 company’s showing no signs of rebounding. It’s down 13% in the last month, too.
And yet, incredibly, City analysts are backing the luxury carmaker to make a dramatic u-turn. Today 11 brokers have ratings on the company. Their consensus opinion is Aston Martin’s shares will surge 26% in value by next July, to 46.73p. One analyst even thinks they’ll rebound a whopping 51% to 55p!
If the City’s average 12-month price target turns out to be correct, a £9,999 investment in Aston Martin would turn into £12,589.
How realistic are these forecasts?
No share price projection is ever set in stone, of course. And it’s never a good idea to simply rely on the opinions of others when choosing stocks to buy.
So for Aston Martin, I’ve come up with my own ideas of what could drive its shares higher. These include:
- Strong demand for its high-margin special models (like the Valhalla).
- Stabilising production rates after 2025’s heavy fall.
- Existing major shareholders (like Mercedes-Benz or Saudi Arabia’s Public Investment Fund) increasing their stakes.
- Further restructuring (like headcount reductions) to cut costs.
- Hitting its target of positive free cash flow by the end of 2026.
However, my research has also shown reasons to believe the carmaker could slump even further. Possible threats include:
- Weakening consumer demand as the Middle East war continues.
- Worsening US tariffs that impact sales to its biggest market.
- Rising costs as inflationary pressures increase.
- Surging net debt (this rose again in Q1 to an uncomfortable $1.46bn).
- Fresh supply chain disruptions that impact deliveries.
Are Aston Martin shares a buy?
In an encouraging sign, news coming from the carmaker has been far better of late. Strong sales of special models in Q1 meant quarterly revenues leapt 16% year on year, to £270.4m.
This — along with a sharp improvement in margins to mid-30% territory — meant underlying operating losses dropped 12%, to £56.9m. Aston Martin’s hopes of “improving materially towards breakeven” in 2026 have received a boost following its strong start to the year
Yet, we’ve seen several false start from Aston Martin down the years. And I fear this could prove to be another one given how weak the luxury motor market is, and how it could worsen as the US-Iran war continues. Add in the risks associated with the company’s stretched balance sheet, and I won’t be investing in the company, at least not yet.
That said, it could be worth consideration from more risk-tolerant investors seeking recovery stocks. And particularly at current prices — Aston Martin shares trade on a modest price-to-sales (P/S) ratio of 0.2.
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Royston Wild does not hold any positions in the companies mentioned.
This story originally appeared on Motley Fool
