Aston Martin’s supply deal with Lucid Group Inc (NASDAQ:LCID) helped fuel the carmaker’s continuing share price gains on Monday, but it won’t provide all the answers.
That’s according to AJ Bell analyst Russ Mould, who noted Aston’s investment and issue of shares to Lucid in return for electric vehicle batteries marked a wider bid for relevance.
“It’s the latest in a string of strategic initiatives designed to make the iconic British car maker more relevant in the modern age,” Mould said, following a deal with China’s Geely in May.
These have indeed helped to fuel a sustained climb in Aston Martin shares over the past year, Mould noted, but cash flow and debt reduction are “really” key drivers.
“As lovely as the cars are, as famous as the name is and as welcome as podium places in F1 races are, in the end it is pounds and pence that will dictate where the share price goes from here,” he added.
Aston Martin will invest £182mln in Lucid and issue 28.4mln shares to the US automaker under the deal, which will supply electric vehicle powertrain technology and parts in return.
Positive results in March and May respectively have helped Aston Martin to overcome share price losses after issuing a profit warning in November, with the stock rebounding 300% since.
In May’s first-quarter update, Aston Martin reported a 9% fall in net debt to £868mln while also penning cash outflows of £33mln compared to inflows of £43mln during the same period in 2022.
A strong order book and shipments of Aston’s Valkyrie and DB22 cars in the latter half of this year should also aid the company’s recovery “if the timetable can be met,” Mould added.
However, “if the promised cashflow does not materialise in the second half then there could yet be a few more bumps in the road,” he warned.
Shares were up 11.8% to 365.7p on Monday.