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Fernando Alonso’s podium in the recent Formula One race in Bahrain has given Aston Martin (LSE:AML) shares a momentum.
After going fastest in practice, Alonso passed seven-time world champion Lewis Hamilton during the race.
Pundits even claim that Aston Martin could challenge championship contenders Red Bull and ferrari this season.
This recent success is boosting the brand’s stock price. It has nearly doubled so far this year and experts predict that the podium could have added $400 million to the company’s value. The share price is up as much as 30% compared to before the race weekend.
If there is more to come, could this be a good season for Aston Martin and its shareholders?
Aston Martin, beyond Bond
It is certainly an exciting new chapter for the Aston Martin brand that could win a new generation of fans. To date, the 110-year-old automaker has been synonymous with james linkparticularly their historical models.
But participation in F1 brings him up to date. Over 60% of customers are new to the brand, partly through its racing strategy. His F1 fan base numbers 150 million people. Importantly, test drives are up more than 60% in key markets.
Last year, Aston Martin’s revenue increased by 26% and the average selling price exceeded £200,000. Many of their models are out of stock by 2023.
After around 6,400 sales in 2022, it is aiming for 7,000 this year and 10,000 in the longer term.
This all sounds like a winning proposition, which is vital to ensure continued investment for model upgrades, marketing and new launches.
The price of success
But winning costs money. So is keeping up with the pack in a rapidly changing automotive market.
Revenue of £1.4bn in 2022 was eaten up by production costs, investment, overhead and interest. This left the business with an annual loss of £527m, almost three times what it was in 2021.
Electrification will also be a challenge, as Aston Martin guides petrol engine lovers to a new high-performance portfolio as the world changes vehicle fuels.
Its first plug-in hybrid, the Valhalla, begins delivery in 2024 and the first all-electric model should arrive in 2025.
With many countries looking to ban the sale of new fossil fuel powered cars by 2035, the race remains relevant and exciting.
age and experience
You also have to take into account the unpredictable nature of F1. The leaders can become laggards in some races, such is the frantic pace of development during the season. In addition, the star driver Fernando Alonso is the oldest on the grid at 41 years old. This is well beyond retirement age in such a demanding sport.
His wealth of experience is a key factor in the team’s success. He is a two-time world champion of his time racing with Renault. He also won the Le Mans 24 hour race twice. He has hundreds of podiums, pole positions and fastest laps to his name.
These are great shoes to fill for teammate Lance Stroll, the son of the F1 team owner, should the time come.
Aston Martin is on an exciting and transformative journey. But as a long-term investor, and given the risks involved, I plan to be a bystander and invest elsewhere. However, I will follow the F1 team. And if my portfolio works out for the long term, I look forward to investing in one of their amazing road cars in the future.
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