Aston Martin share price rating upgrade with a 45% upside

Aston Martin Lagonda (LON: AML) share price has been one of the best-performing stocks in the FTSE 250 index this year. The stock rose to the year-to-date high of 397p on July 31st. This price was ~335% from its lowest point in 2022 and was the highest point since February 2022.

Good turnaround story

Aston Martin Lagonda has been one of the best turnaround stories in the UK this year. It has done that by doing several capital raises from some of the biggest players in the world. It counts Saudi Arabia’s Public Investment Corporation (PIC) as one of its core investors. And recently, China’s Geely invested in its turnaround approach.

Aston Martin is still raising cash from investors. According to the FT, the company is raising 210 million pounds, which will be used to pay back its high-interest loans. These funds will be used to buy back this debt and give it room to operate more profitably. Aston has already reduced its net debt by a third to £846 million.

The most recent financial results showed that the company is still seeing demand for its vehicles. For example, the new DB12 Coupe has sold out for the year. Similarly, its other brands like DBS770, Valour, and Valkyrie Spider are doing well. Valour’s 110 units were sold in two weeks while the waiting list is growing.

This growth helped to push its H1 revenue upwards by about 25% while its gross profit rose by 26%. It sees its revenue coming in at £2.5 billion this year and gross margins being mid-40s%. 

Aston Martin is also moving to the electric vehicle industry as it leverages its partnerships with the likes of Lucid, Geely, and Mercedes Benz. While most people will always prefer its combustion engine cars, its BEV cars will help it deal with regulatory issues.

Is Aston Martin a good stock?

AML chart by TradingView

Aston Martin is a well-known iconic brand that has been around for over 100 years. Like other automakers, the company has gone through challenges. Its recent challenge was its huge debt load in a high-interest environment. 

The company has handled most of these challenges in painful transactions that have led to dilution. But I think these measures were necessary to save the company. Now, it has highly invested shareholders, including Lawrence Stroll, who a substantial stake in the company.

Most importantly, the company still has unprecedented demand for its products, which will help in its recovery. Therefore, I think that the stock has more room to run, with the initial target being at 396p, the highest point this year. A break above that level will see it rise to 500p, which is ~45% above the current level.

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