Shares of Aston Martin (LSE: AML) looked set for a big comeback last summer. Between May and July, the FTSE 250 stock nearly doubled to reach 395p after the carmaker narrowed losses and unveiled new models.
Now, with the share price plummeting to 176p – a worrying 55% decline in six months – the apparent turnaround has proved to be a mere mirage. Adding to the woes, the stock currently languishes near the bottom of the year-to-date performance chart for the FTSE 250.
So, reports yesterday (6 February) that the company is looking for a new CEO aren’t likely to help matters.
What’s going on here? And is this a good opportunity to snap up some shares while they’re in the doldrums again?
Executive turnover
According to Bloomberg, Executive Chairman Lawrence Stroll has been reaching out to former and current bosses of luxury car firms as he hunts for possible candidates to succeed CEO Amedeo Felisa.
This would be the fourth CEO in as many years.
Felisa, who was chief executive of Ferrari between 2008 and 2016, has only been in charge since May 2022.
Of course, we don’t know the exact circumstances yet. But it’s clearly not ideal when a company has a revolving door of CEOs. It can indicate instability or uncertainty within the organisation. And frequent changes in leadership often disrupt strategic initiatives and erode investor confidence.
Moving in the right direction
Overall, I’ve been impressed by the recent progress at Aston Martin.
Yes, it’s still losing money, recording an interim pre-tax loss of £142m for the first six months of 2023. But that loss was down by 50% from the year before. Revenue advanced 25% to £667m and new models have been very well received.
There was a hiccup in Q3 relating to the rollout of its new DB12 sports car. Consequently, it likely shipped 6,700 vehicles last year instead of the previously forecast 7,000.
Despite this, management reiterated its confidence in achieving its financial targets.
Period
Revenue
Adjusted EBITDA
2024/25
£2bn
£500m
2027/28
£2.5bn
£800m
Will I invest?
Now, I’d love to be confident enough to add the shares to my portfolio. The brand and products are obviously top-notch while the stock is currently trading on a lowly price-to-sales (P/S) ratio of 1.
Furthermore, the name Aston Martin seems to me like it belongs in the blue-chip FTSE 100 rather than struggling in the mid-cap index. I find it sad to see, actually.
However, investing with one’s heart is rarely wise. My head is telling me it’s just a matter of time before one of its backers — ranging from Mercedes-Benz and China’s Geely to Saudi Arabia’s sovereign wealth fund — takes a controlling interest in the company.
The problem is it’s very hard to tell where the share price will be if and when that happens.
On appointing Felisa, Lawrence Stroll told Reuters: “Nobody knows how to make ultra-luxury performance cars better than Amedeo. He saw the movie, he wrote the script.”
Presumably then, he will be very difficult to replace. And this adds uncertainty to the investment case here.
To me, Aston Martin embodies a common investor dilemma: I greatly admire the company’s products, but I harbour nagging doubts about the stock. As such, I’d rather invest elsewhere in February.
The post Should I buy Aston Martin shares as the FTSE 250 firm seeks a new CEO? appeared first on The Motley Fool UK.
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Ben McPoland has positions in Ferrari. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
