Aston Martin Lagonda Global Holdings PLC “still a few years away” from turning the corner, JPMorgan believes
The company, which was valued at £5bn when it floated at 1,900p a share in October 2018 but is now worth less than half of that, is still a few years away from a business model that can generate cash and create equity value, the broker said.
The company was rescued in January 2020 by Canadian billionaire Lawrence Stroll and a consortium of financial heavyweights but the new team’s turnaround plans were quickly knocked off course by the coronavirus (COVID-19) pandemic.
“A portfolio that is made up of 4k GT cars, 4-5k SUVs and 2k mid-engine cars can make money. For AML to get there (probably by 2024/25), however, it could end up burning >£200m in cash per year (in ’21/22),” the broker reckons.
JPMorgan (JPM) said the “equity story is still risky” and comes in two parts.
The first phase (2021/22) will entail Aston Martin (AML) focusing on rebuilding the GT/Sports car brand and profitably flogging the DBX model.
This, in JPM’s view, should constrain cash burn and obviate the need for another embarrassing fundraising.
“The second growth phase (2023 onwards) will depend not only on the major product refreshes of the core portfolio but also on AML’s mid-engine future and electric drivetrains; however, with Lawrence Stroll and Tobias Moers (CEO; ex CEO and CTO at Mercedes-AMG) at the helm, AML has the right set of people in place to build a mid-engine business and target a bigger and wider TAM,” the broker said.
JPM has a neutral rating on the shares and a price target of 1,200p.
Shares in Aston Martin were down 2.0% at 1,938p.
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