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Aston Martin progress on 'game-changer' DBX sparks HSBC upgrade

“After months of underperformance and the future of the company at stake, we believe the launch of the DBX is potentially game-changing,” analysts at the bank said in a note to clients

Aston Martin Lagonda Global Holdings PLC -
Aston Martin is making the DBX from its new plant at St Athan in Wales

Aston Martin Lagonda Global Holdings PLC (LON:AML) shares revved up on Monday after HSBC analysts upgraded the luxury car manufacturer to a ‘buy’ rating.

The bank moved its rating out of the ‘neutral’ gear after a good set of results, helped by the early delivery of the first few of its DB4 GT Zagato “new-old continuation model” at around £4mln a pop, which allowed the company to reaffirm its 2019 margin guidance.

“After months of underperformance and the future of the company at stake, we believe the launch of the DBX is potentially game-changing,” HSBC said.

So, paraphrasing the title of next year’s new Bond movie featuring the Aston Martin Valhalla, the analysts said it's “no time to die” for Aston Martin, but time for a potential resurrection on the path towards positive free cash flow generation in 2022.

Encouraged by Aston Martin management's words that the launch of the DBX SUV was “on track”, HSBC said it was now working on the assumption that first customers will get their keys on time in June and so could “look beyond” what is likely to be a weak first half of 2020 due to continued pressure on margins and cash flow from higher costs and no major launches.

In the short term, the global launch of the DBX is on 20 November, meaning analysts and investors will be listening out for any messages from the company as it is required to communicate to the market when it reaches the first 1,400 orders, with HSBC believing this could be reached “in the first few months”.

“We are more concerned about the ability of the company to sustain demand beyond 2020, but the launch of a hybrid powertrain variant in 2022 could provide some level of support.”

HSBC lifted its target price for the James Bond carmaker to 550p from 533p, with the shares having lost around three quarters of their value since floating last year at a price of 1,900p.

On Monday, the shares were up more than 4% to 487.6p by midday.

Quick facts: Aston Martin Lagonda Global Holdings PLC

Price: 630 GBX

LSE:AML
Market: LSE
Market Cap: £1.44 billion
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