Aston Martin Lagonda (AML) raced to the top of an unwelcome leader board today, topping the list of FTSE 250 fallers, as broker Jefferies downgraded the stock to underperform and slashed its price target to 120p from 530p.
“Four years into listed life, AML has yet to achieve the sustainable operating structure that would lead to a stable capital structure” the broker commented.
"Despite having just completed a major rights issue, AML still screens as a candidate for future recapitalization by the time the business achieves a viable operating structure, possibly 2024" it said.
Jefferies said “It feels like AML investors must either be prepared to recapitalize the business again once operations reach viable metrics or believe that an original equipment manufacturer will step in and provide the scale AML is missing.”
The broker does not think Geely, the group owned by Chinese billionaire Li Shufu, and which holds a 7.6% stake fits that profile.
On financials, margins are weakening and free cash flow was negative in quarter three and year-end net debt is forecast to remain at £800mln until the end of 2024 although this number is highly sensitive to forex moves either way.
Jefferies did raise its 2022 revenue forecast by 11% on pricing/forex considerations, despite a 6% cut to volumes, but reduced EBITDA margin estimates by 350bps to 14.8% and doubled full-year cash burn expectation to £337mln.
DBX seems to be still looking for its position in the market, with demand below initial expectations even if front engines have been surprising positively, the broker noted.
"Improving AML returns are even more dependent on the launch of the mid-engine platform in 2024 and the end of Valkyrie's production run" Jefferies concluded.
Shares fell 8.1% to 131.3p.