LONDON – Aston Martin Lagonda, one of the United Kingdom’s most prestigious car makers, faces obstacles worthy of a James Bond 007 film on its growth path.
But, at least, investors no longer need to pay top dollar for the ride.
Shares in the British boutique car maker fell 17 percent in early Thursday trading, following the publication of annual results, and are down 40 percent since the October initial public offering.
Back then, the company pitched itself – with surprising success – as a luxury brand deserving a top end valuation.
Almost five months later, it is valued more in line with more regular car makers.
That looks appropriate, given its precarious finances and high-risk strategy.
Thanks, in part, to the relaunch of its Vantage sports car, Aston Martin sold 26 percent more cars to dealers last year than in 2017.
The car making company expects roughly 12 percent growth in deliveries this year, before another acceleration when its new sport-utility vehicle hits showrooms in 2020.
The company’s financial plan depends heavily on the success of this SUV, which will come with a starting price of GBP 140,000 ($186,000).
Weakening sales of rival Bentley’s SUV last year aren’t encouraging, though.
Chief Executive Andy Palmer conceded Thursday that the luxury SUV category was “uncharted territory.”
Aston Martin’s 2018 numbers and 2019 guidance did not deviate much from expectations carefully set during its initial public offering process.
It made an operating margin of 13.4 percent, excluding IPO expenses and capitalizing most product-development costs.
Tellingly, free cash flow was negative.
Thursday’s extreme share price reaction has much to do with an illiquid equity base.
Less than 30 percent of the shares are free to change hands, and this may not change soon.
The company’s anchor shareholders, led by Italian private-equity fund Investindustrial, are probably in no hurry to sell given the share-price collapse since October.
Investors should buckle up for further big swings in both directions.
The first Aston Martin sports car to appear in a James Bond movie was the DB5 model. It appeared in the 1964 film “Goldfinger.”