Overview of the Downgrade#
Bernstein has downgraded Aston Martin Lagonda's stock rating from "outperform" to "market-perform." This change comes after the British luxury carmaker announced a significant reduction in its mid-term production plans, cutting its price target from 110p to 50p.
Financial Performance and Forecasts#
Aston Martin's stock closed at 43.84p on March 10, reflecting a steep decline of 46.3% over the past year. The company’s Chief Executive, Adrian Hallmark, revealed that Aston Martin will adjust its annual production target to between 5,500 and 6,000 vehicles. This is a significant drop from the initial goal of 14,000 units set during its 2018 IPO. Bernstein has revised its volume forecasts, predicting a core volume of 5,006 units for 2026, an 18% decrease, and a 22% drop for 2029.
Financial Challenges#
The company continues to face challenges, including high debt levels and disappointing sales. For 2025, Aston Martin reported revenue of £1.26 billion, with a gross profit margin of 29.4%, down from 36.9% in 2024. Bernstein anticipates that adjusted earnings before interest and taxes (EBIT) will improve from a loss of £189 million in 2025 to a loss of £98 million in 2026, eventually reaching breakeven in 2027.
Future Outlook#
Bernstein estimates that Aston Martin's enterprise value could reach £3.31 billion by 2030, based on its projected EBIT. However, the brokerage has factored in a £150 million equity raise, which could lead to a 34% dilution of shares. Additionally, free cash flow is not expected to turn positive until 2028, with cash reserves projected to decline significantly by mid-2027. The company’s order book remains at five months for 2025, falling short of management's target of 6-9 months.