Aston Martin was under the cosh on Tuesday after Jefferies downgraded the shares to ‘underperform’ from ‘hold’ and slashed the price target to 120p from 530p as it said that recapitalisation risks remain after the rights issue.
Jefferies said the majority of the change in the target price stems from higher share count post rights issue, lower discounted cash flow-based EV on reduced earnings and higher discount rate, and higher estimated YE22 net debt.
“Despite having just completed a major rights issue, AML still screens as candidate for future recapitalisation by the time the business achieves a viable operating structure, possibly 2024,” Jefferies said.
The bank argued that four years into listed life, AML has yet to achieve the sustainable operating structure that would lead to a stable capital structure.
“Trading conditions have certainly been challenging but the last few years have also been supportive for luxury sports car demand,” it said.
On the upside, it noted that progress on ASPs suggests the strategy pursued by Lawrence Stroll is right on the brand and product side, but AML is falling behind peers on industrial scale and still far from hitting the volume/ASP equation required to be a standalone business.
“It feels like AML investors must either be prepared to recapitalise the business again once operations reach viable metrics (positive FCF guidance for 2024) or believe that an OEM will step in and provide the scale AML is missing.
“We do not see how Geely, whose controlling shareholder acquired a circa 6-7% stake, fits that profile.”
At 0910 GMT, the shares were down 9.6% at 129.30p.
