Could Aston Martin Be Ready To Thrive, Not Just Survive?

For a while it looked as though financial problems might deprive legendary movie spy James Bond of his traditional Aston Martin getaway wheels. Still, according to a report, the next 007 can stop worrying because the British luxury sports carmaker is rallying and can look forward to some positives.

The report, from Moody’s Investors Service, said a recent improvement in Aston Martin’s finances suggest a buoyant performance through 2025. The report raised Aston Martin’s rating to positive from stable.

“(the change) reflects the company’s improving operating performance in the first half of 2023, which Moody’s expects to be sustained over the next 18 months on the back of the company’s ongoing launch of the next generation sports cars,” the report said.

By 2025, Aston Martin should also be able to present its first battery- electric vehicles.

Aston Martin's news has been positive recently, with losses and loan costs cut. New investments show confidence in its future. Another positive was a technology deal with Lucid to buy its electric driving systems.

In July, Aston Martin announced it cut adjusted operating losses in the 2^nd quarter ended June 30 to £38.9 million ($49.5 million), down from an expected loss of £51 million ($65 million), spurred by higher prices and sales of its DBX707 SUV and limited-edition V-12 Vantage Roadsters. The recently launched next-generation DB12 has sold out. The £1 million ($1.3 million) limited edition Valour should begin sales before the end of the year. Aston Martin stuck with its 7,000 vehicles sales forecast for 2023, and an adjusted core profit margin of about 20%.

In June, Aston Martin said it planned to double sales to £2.5 billion ($3.2 billion) within 5 years and produce earnings before interest, tax, depreciation and amortization (EBITDA) of £800 million ($1 billion) in 5 years. The long-term sales target was 17,000 a year.

Earlier this month Aston Martin announced plans to raise £210 million ($267 million) by selling new shares. The largest shareholder, Chairman Lawrence Stroll’s Yew Tree consortium, Saudi Arabia’s Public Investment Fund, Geely of China, and Mercedes agreed to buy about £115 million ($146 million) of the shares with the rest available to institutional investors.

Moody’s said the new share placement showed the company had a more balanced financial policy, and it listed some positives for Aston Martin’s outlook, including sales of more than 8,000 vehicles by the end of next year.

“Moody's forecasts (Aston Martin) to achieve strong revenue growth of about 15% to £1.6 billion ($2.0 billion) revenue in 2023, and a further 25% increase in 2024 to reach close to its £2 billion ($2.5 billion) revenue ambition. The recently launched and well-received DB12, the additional new model launches planned for the next 12 months, as well as the continued success of its DBX should support strong volume growth over the next 18 months, and Moody's forecasts sales to exceed 8,000 units by the end of 2024,” the report said.

“While volume growth is considered a key driver to achieve its revenue and EBITDA targets, Moody's understands that (Aston Martin) no longer has specific volume targets. Instead, the company focuses on increasing its average selling price (ASP) and achieving a gross margin of above 40% for new models launched to drive its revenue and EBITDA growth,” according to the report.

The current average selling price for Aston Martins is about £184,000 ($234,000).

In a report entitled “Improving the pace – faster laps yet to come”, Bernstein Research had some positive thoughts, saying DBX707 and V12 Vantage Roadster deliveries continue to accelerate, especially in the U.S. Gross profits should hit 40% in 2024.

“Gross margins are expected to increase alongside the proportion of new models in wholesale volumes. Management has insisted that every new model it produces enjoys gross margins of at least 40%. With the new DB12 and new special Valour set to begin deliveries in Q4, Aston’s gross margins are expected to receive a significant boost towards this target,” Bernstein analyst Daniel Roeska said in a report.

Investment researcher Jefferies was slightly less positive in a report describing Aston Martin’s latest earnings report as a small step in the right direction.

“Better than consensus across all key metrics confirms stabilization at Aston Martin although gross margin improvement remains slow,” Jefferies said.

Aston Martin’s losses in 2022 rose to £495 million ($629 million) from £213.8 million ($272 million) the previous year. In the final quarter of 2022 though the company posted an operating profit of £6.6 million ($8.4 million). Aston Martin’s recovery has been undermined by supply and production problems.

The 26th James Bond movie is expected by 2025. Just in time for the hero to sneak away from the bad guys in a silent and electric Aston Martin?