Aston Martin Lagonda (LSE:AML) shares recently plunged on fears over US tariffs on car imports. Two Fools talk about whether this could be a buying opportunity to consider.
Note: return data correct as of time of recording.
Transcript:
CHRIS: Hi Fools, Chris Nials here and I’m joined by Motley Fool analyst Zaven Boyrazian. Morning Zaven!
ZAVEN: Hello!
CHRIS: We’re going to be talking about Aston Martin today, and how fears over US tariffs on car imports have sent its share price tumbling. Zaven, what’s been happening?
ZAVEN: Well Chris, we’ll get to the tariff talk in just a moment, but before we do it’s important to point out that Aston Martin Lagonda shares have actually been stuck in reverse (if you’ll excuse the pun) over the last year or so.
The FTSE 250 carmaker now deals at 70.2p per share, a whopping 59.5% lower than it was 12 months ago. So someone who bought £10,000 worth of shares back then would have seen the value of their investment tumble to £4,046. They wouldn’t even have received any dividends to help soften the blow, either.
But while Aston Martin’s share price sits significantly below the 661.9p it was at five years ago, there’s no doubt that it could yield sterling potential returns if it recovers. But that looks like quite a significant ‘if’ to me right now.
CHRIS: That sounds somewhat ominous! So do you think that investors should consider buying Aston Martin shares today?
ZAVEN: Well I think it’s easy on one hand to see the company’s incredible appeal. Its products are the epitome of style, speed. sophistication, and let’s face it, sex appeal.
Aston Martin’s had an association with the likes of James Bond since the mid-1960s, and the brand’s involvement in the dynamic world of Formula One haven’t done it any harm, either.
But while its label and products are highly desirable, the same certainly can’t be said for the company itself, at least in my view. So what’s the problem?
The issue is that Aston Martin is fighting fires on a number of fronts. Last year, pre-tax losses rose by 21% to £289.1m, partly due to a 9% drop in wholesale volumes. Sales declined on the back of supply chain disruptions and tough conditions in China, troubles that still persist.
As a result, net debt — which was already pretty concerning — shot up sharply. At the end of 2024, Aston had net debt of £1.2bn, up 43% year on year. And so the spectre of fresh rights issues and debt issuances still looms large.
CHRIS: And as if Aston Martin didn’t have enough problems, President Trump has of course drawn global carmakers further into his escalating trade battle, and AML are certainly not immune to these.
ZAVEN: Yes that’s right – so as everyone watching will no doubt have seen, the US has slapped heavy tariffs on all imported cars, putting a hefty premium on already-expensive marquee car manufacturers like Aston Martin.
On the plus side though, the delays to previously announced tariffs from the US may suggest that this thumping import tax isn’t a done deal. In addition, the UK chancellor Rachel Reeves has said the government is “in intense negotiations” with Washington to avoid any car tariffs.
But just the mere threat of trade tariffs is enough to chill my bones and I’m sure that’s the same for any investors watching who own shares in Aston Martin. Last year, sales to the Americas — dominated by demand from US customers — accounted for 40% of group revenues, making it by far the company’s single largest market.
With all of its manufacturing located in the UK, Aston Martin would be especially vulnerable to any ‘Trump Tariffs.’
CHRIS: Ok great – thanks so much for the insight Zaven, So what’s next for Aston Martin then?
ZAVEN: Well it’s hoped that a string of new car launches (including the recently revamped Vanquish and the upcoming Valhalla) could revive the company’s fortunes. But the highly competitive nature of the car market means that success is by no means guaranteed.
And on top of that, Aston Martin’s recovery is made even more difficult given those challenging economic conditions in key markets that we’ve already talked about. On balance, I believe that this is a FTSE 250 share that investors should strongly consider steering well clear of.
CHRIS: Thanks so much again Zaven, and thanks so much to everyone watching. Fool on!
