Aston Martin Is a Buy: Goldman Sachs
Focus in the auto industry has always been on Tesla, owing to its credentials as an electric vehicle pioneer. In comes Aston Martin Lagonda, whose sentiments and outlook have improved significantly. Over the past month, the stock has rallied by more than 40%, turning out to be a bright spot for the auto industry.
Aston Martin Improving Outlook
The latest catalyst fueling a buying spree on the British Automaker is analysts at Goldman Sachs insisting that this stock is a buy for the first time in nearly four years. According to analysts led by George Galliers, unveiling new core car models every quarter has set the company up for tremendous growth.
Special models like DBR22 and Valour are expected to deliver higher average selling prices that should see the automaker generate higher profit margins. In March, the automaker announced that it expected significant growth in profitability compared to 2022, driven by an increase in volumes of car sales to about 7,000 units. It also expects higher gross margins in its core and special vehicles. The company is on course to start deliveries of its next-generation sports cars before year-end.
According to the company’s executive chairman Lawrence Stroll, the order book is stronger now more than ever, backed by solid underlying fundamentals. In addition, the company is experiencing strong demand in the market as it focuses on delivering 10,000 wholesale units over the coming years. Last year, it sold about 6,400 cars. The company also seeks to attain more than $2.55 billion in annual revenues by 2025.
Electric Vehicle Push
The luxury car maker has also set sights on the burgeoning electric car segment. It has already reached a $232 million deal to enter the segment with the help of Lucid Group. Under the terms of the agreement, Lucid is to get a 3.7% stake in Aston Martin worth $232 million.
In return, Lucid is to provide the much-needed electronic vehicle powertrain and battery systems that the British Automaker needs to develop its fleet of electric cars. The British Automaker, which gets its engine and EV technology from Mercedes Benz, intends to strengthen its line of luxury vehicles with the first hybrid car early next year. It also plans to unveil an electric car in 2025 as part of its expansion strategy.
Nevertheless, it faces an uphill task as it plays catchup to industry hitters. Tesla remains the market leader in electric vehicles, having already sold thousands of cars as it innovates around autonomous driving features. In addition, like other established automakers, Tesla has secure key supplies for materials needed to develop batteries in-house, strengthening its competitive edge in the industry.
Nevertheless, the market for electric vehicles is big, with no one automaker expected to meet the demand. As the race to reduce carbon emission heats up, demand for such cars grows, presenting a massive market.
Since going public in 2018, Aston Martin has been under immense pressure. Its pretax loss more than doubled last year. However, its fortunes appear to be changing in the aftermath of Canadian tycoon Stroll spearheading an investment into the company.