Image source: Getty Images
Earlier this month, the Aston Martin (LSE:AML) share price hit a new 52-week low. At just 44p, it already ticks one of the boxes required to be classified as a penny share. Currently, the market capitalization is over £100m, however this could change before we reach December. But is it unthinkable to consider this historical company in this light?
The problems are many
The stock has fallen 30% in the past month, bringing its decline for the year to 46%. The latest decline sits on top of long-standing structural problems that I have flagged many times. The company has been making losses for a long time. Because the company continues to burn cash, it experiences negative free cash flow. As a result, it has to borrow more and more, with a total debt now of £1.38bn.
This is not sustainable over time, and is reflected in the multi-year decline in share prices. However, recent sales are mainly driven by the release of 2025 results. It issued another profit warning, citing a “a very challenging place”. Annual revenue fell 21%, while pre-tax loss rose 26%. In addition, the company recently announced a large layoff (up to 20% of the workforce), which does not bode well for the future.
Penny shared some thoughts
I usually refer to a company as a penny share if the market price is less than £100m and the share price is less than £1. For Aston Martin to be included in such a category, the market price would need to fall from the current level of £445m. Before anyone thinks this is too crazy, remember that the company was valued at around £4bn when it went public in 2018. So the sharp drop over a decade shows that this is not an unusual view.
From here, we will need to see the stock price continue to decline, pulling down the market cap with it. The catalyst for this would be if the company falls outside FTSE 250. A quarterly rebalancing could see the stock downgraded. This will put more pressure on the share price as FTSE 250 trackers will sell the stock and replace it with a promoted company.
Basically, the share price could continue to fall if the trading updates show that there is no improvement in curbing the low demand for car sales.
Losing hope
We would need to see the pace of share price declines continue for the market cap to fall below £100m by December. In fact, this may be too much of a stretch. The latest report details measures to reduce capex costs, and reduce headcount. Such measures are expected to save £40m a year, which will go some way towards strengthening finances.
In addition, if geopolitics is quiet, the company can benefit. Reducing tariff tensions with the US and China would help, as well as greater consumer confidence in large purchases.
In the end, I don’t think Aston Martin will be a penny share this year. However, I think the stock will continue to be under pressure, and don’t think it’s low enough to consider it a value pick right now.
