Aston Martin share price collapses to a new low. Buy the dip?

  • June 30, 2022

The Aston Martin (LON: AML) share price continued its bearish trend on Thursday as demand for the stock waned. The stock dropped to an all-time low of 434p, which was over $97% below the all-time high. Its market cap has dropped to about £504 million, which is significantly lower than when it went public.

Why is AML collapsing?

Aston Martin Lagonda is one of the most iconic auto brands globally. The company manufactures some of the most iconic cars like Vantage, DBS, DB11, Valkyrie, and DBS. Its vehicles sell for millions of pounds and are well-known for their presence in James Bond movies.

Aston Martin shares have had a difficult period even as demand for its vehicles remains substantially high. The stock has lost almost 100% of its value as the company has kept losing talent. It has lost several CEOs in the past few years.

Aston Martin has diverged from other luxury car brands like Ferrari. Ferrari, the famed Italian car company, is now valued at more than $30 billion as its stock has doubled in the past five years, 

The company is even struggling in Formula 1, where its drivers like Sebastian Vettel and Lance Stroll are all in the bottom ten. The two have accumulated just 16 points combined, The team ranks at position eight out of ten.

Aston Martin share price drop is worse than other automakers like Tesla, BMW, Toyota, and Ferrari. All these stocks have retreated as investors anticipate margin compression. 

The company’s growth has slowed dramatically. In its most recent quarterly results, the firm said that it expects that its volume will increase by just 8% this year. It expects to sell about 6,600 car units.

Still, there are two potential catalysts that could push the stock higher. First, the firm has a new CEO from Ferrari. There is a possibility that the new leader will accelerate the company’s turnaround. 

Second, the depreciating share price could make the firm a viable acquisition target, especially by private equity firms. The idea is that it is easier to change it as a private company.

Aston Martin share price forecast

The daily chart shows that the AML stock price has been in a strong bearish trend in the past few months. The decline culminated with the stock’s drop below the important support at 707p, which was the lower line of the descending triangle pattern. 

The stock has also moved below the 25-day and 50-day moving averages while the RSI has moved below the oversold level.

Therefore, there is a likelihood that the shares will continue falling for a while before it makes a recovery in the next few months.

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