Image Source: Getty Images
In 2018, Aston Martin Lagonda (LSE:AML) went public through an initial public offering (IPO). The price at that time was 19,000p. A quick price search will show an investor that the current price is around 225 pence. Clearly this is a big drop in the last five years. Even over the past year, it’s down 36%.
However, with Aston Martin’s share price up 129% in six months and clear momentum with the brand, could it finally return to 19,000 pence?
The case for a longer-term move higher
For shares to ever have a chance to return to IPO levels, it will take several years. This is not a negative, in fact if someone told you it would happen in a matter of months I would be very concerned!
To justify this type of move up, the business must continue to diversify. Part of the reason for the jump in recent months is due to the success of the SUV model, the DBX. It accounted for more than 50% of wholesale units in 2022. With future projects including an electric car by 2025 and other initiatives, this broader network should capture a broader range of customers.
Another key point would be to see the Formula 1 partnership continue to flourish. The team has done well so far this season and the marketing benefits the business. In the annual report he mentions that more than 60% of customers are new to the brand, something he attributes in part to the connection with F1. In the coming years, if the F1 team does well, it could lift Aston Martin to a better global level, which would naturally trickle down to new customers and increased revenue.
why it could never happen
In 2018, the IPO price assigned a market capitalization of £4.3bn. Part of this valuation came from the assumption that the company could sustainably increase profitability. This did not happen, and the £57.1m loss in 2018 was actually the smallest loss of any year since! To put it in perspective, the loss for 2022 was £527.3m.
So a clear sign of market capitalization even approaching IPO level would be for losses to be pared down and ideally turned into gains. When a company becomes profitable, it is much easier to assign value, and investors can use metrics like price-earnings to get a sense of value.
The problem with Aston Martin is that, since it went public, I have seen no indication that it can make a net profit. Fundamentally, it’s impossible to talk about big stock price gains if a company can’t make a profit.
balancing everything
I have a hard time seeing stocks reaching IPO price even several years later unless they can produce several years of net profit.
However, this does not mean that investors should not consider buying shares. In fact, there is a good chance that Aston Martin’s share price will continue to rise over the next year. This is based on the momentum the company has at the moment and the better than expected results for 2022.
var config = {
apiKey: ‘1ed121d592e04642d57912bb369ef696621661a3’,
product: ‘PRO_MULTISITE’,
logConsent: false,
notifyOnce: false,
initialState: ‘NOTIFY’,
position: ‘LEFT’,
theme: ‘DARK’,
layout: ‘SLIDEOUT’,
toggleType: ‘slider’,
iabCMP: false,
closeStyle: ‘button’,
consentCookieExpiry: 90,
subDomains : true,
rejectButton: false,
settingsStyle : ‘button’,
encodeCookie : false,
accessibility: {
accessKey: ‘C’,
highlightFocus: false },
onLoad: function () { // hide Cookie Control recommended settings button.
var recommendedSettingsButton = document.getElementById(‘ccc-recommended-settings’);
if (recommendedSettingsButton) {
recommendedSettingsButton.classList.add(‘hide’);
} },
text: {
title: ‘Privacy Notice’,
intro: ‘This site uses cookies, pixels, and other similar technologies to improve your web site experience and to deliver you personalised ads about our own and third party products and services. Please read more about how we collect and use data about you in this way in our Cookies Statement in our Privacy Policy. You can change your cookie settings in your browser at any time. ‘,
necessaryTitle: ”,
necessaryDescription: ”,
thirdPartyTitle: ‘Warning: Some cookies require your attention’,
thirdPartyDescription: ‘Consent for the following cookies could not be automatically revoked. Please follow the link(s) below to opt out manually.’,
on: ‘On’,
off: ‘Off’,
accept: ‘Accept’,
settings: ‘Cookie Preferences’,
acceptRecommended: ‘Accept Recommended Settings’,
notifyTitle: ‘Privacy Notice’,
notifyDescription: ‘This site uses cookies, pixels, and other similar technologies to improve your web site experience and to deliver you personalised ads about our own and third party products and services. Please read more about how we collect and use data about you in this way in our Cookies Statement in our Privacy Policy. You can change your cookie settings in your browser at any time. ‘,
closeLabel: ‘Save Preferences and Close’,
accessibilityAlert: ‘This site uses cookies to store information. Press accesskey C to learn more about your options.’,
rejectSettings: ‘Reject All’,
reject: ‘Reject’,
},
branding: {
fontColor: ‘#fff’,
fontFamily: ‘Arial,sans-serif’,
fontSizeTitle: ‘1.2em’,
fontSizeHeaders: ‘1em’,
fontSize: ‘1em’,
backgroundColor: ‘#313147’,
toggleText: ‘#fff’,
toggleColor: ‘#2f2f5f’,
toggleBackground: ‘#111125’,
alertText: ‘#fff’,
alertBackground: ‘#111125’,
acceptText: ‘#ffffff’,
acceptBackground: ‘#111125′,
buttonIcon: null,
buttonIconWidth: ’64px’,
buttonIconHeight: ’64px’,
removeIcon: false,
removeAbout: false },
necessaryCookies: ( ‘wordpress_*’,’wordpress_logged_in_*’,’CookieControl’,’PHPSESSID’,’fivc’,’fivs’,’fivp’,’Ookie’,’Fool_subinfo’,’_gads’,’_gid’,’_gat’,’_ga’,’__utma’ ),
optionalCookies: (
{
name: ‘Sharing’,
label: ‘I would like content tailored to my personal preferences.’,
description: ‘We work with advertising partners to show you ads of products and services you may be interested in. You can choose whether or not to have ads delivered in a personalised way by setting this option. You can return to review this setting at any time by clicking the "C" logo in the bottom left corner of any page.’,
cookies: ( ‘_ga’, ‘_gid’, ‘_gat’, ‘__utma’, ‘_gads’ ),
onAccept: function () {
// Add Facebook Pixel
!function(f,b,e,v,n,t,s)
{if(f.fbq)return;n=f.fbq=function(){n.callMethod?
n.callMethod.apply(n,arguments):n.queue.push(arguments)};
if(!f._fbq)f._fbq=n;n.push=n;n.loaded=!0;n.version=’2.0′;
n.queue=();t=b.createElement(e);t.async=!0;
t.src=v;s=b.getElementsByTagName(e)(0);
s.parentNode.insertBefore(t,s)}(window,document,’script’,
‘https://connect.facebook.net/en_US/fbevents.js’);
fbq(‘init’, ‘901682110316659’);
fbq(‘track’, ‘PageView’);
fbq(‘consent’, ‘grant’);
// End Facebook Pixel
// Enable Google ad personalization
// gtag (‘set’, ‘allow_ad_personalization_signals’, true ) ;
},
onRevoke: function () {
fbq(‘consent’, ‘revoke’);
// Enable Google ad personalization
// gtag (‘set’, ‘allow_ad_personalization_signals’, false ) ;
},
recommendedState: ‘on’,
lawfulBasis: ‘consent’,
},
),
statement: {
description: ”,
name: ”,
url: ‘https://www.fool.co.uk/help/privacy-and-cookie-statement/’,
updated: ”
},
};
CookieControl.load(config);
