Aston Martin Lagonda Global Holdings, a British luxury carmaker, dominated the headlines in 2018 when it went public. Unfortunately, it hasn’t been smooth sailing since then. The company’s stock has seen a significant decline and investors are beginning to question why. In this blog post, we will examine the reasons why Aston Martin’s stock is so low.
Reasons for Aston Martin’s Low Stock:
1. Heavy Dependence on China:
Aston Martin’s heavy dependence on the Chinese market is one of the reasons why its stock is so low. It has been reported that the company has doubled down on its expansion plans in the Chinese market, with the goal of increasing its sales volumes.
However, China’s economy has been slowing down, and as a result, the market for luxury cars has also been slowing down. With China being one of Aston Martin’s biggest markets, it’s no surprise that the company’s stock has been affected.
2. Uncertainty over Brexit:
Brexit has had a significant impact on the automotive industry as a whole. With the UK’s departure from the EU on the horizon, there’s a great deal of uncertainty as to how it will impact the industry.
Aston Martin has already felt the impact of Brexit. The company is based in the UK and exports a significant portion of its vehicles to the EU. If Brexit results in tariffs or other trade barriers, it could lead to a decline in exports and a decrease in revenue for the company.
3. High Debt Levels:
Aston Martin’s high debt levels have also contributed to the company’s low stock. In 2018, the company had a net debt of £766 million, which is quite significant considering its market capitalization.
High debt means that the company must prioritize its debt payments over other investments that could contribute to growth. As a result, the company may not be able to invest in research and development or expansion plans.
4. Disappointing Financial Results:
Another reason why Aston Martin’s stock is so low is that the company’s financial results have been disappointing. In 2019, the company reported a loss and lowered its earnings forecast for the year.
The loss was partly attributed to a slowdown in sales, particularly in the UK and Europe. The company also cited higher expenses related to its expansion plans as another reason for the loss.
In conclusion, Aston Martin’s heavy dependence on China, uncertainty over Brexit, high debt levels, and disappointing financial results have all contributed to the company’s low stock. While the company has taken steps to address these issues, it remains to be seen whether it will be able to turn things around. Investors will be watching closely to see whether the company’s fortunes improve in the coming months.