Don’t buy Aston Martin shares: buy this stock instead if you can

Aston Martin Lagonda (LON: AML) share price has been in a freefall after the company published weak financial results. The stock plunged to a low of 176.4p this week, down by more than 54% from the highest point this year. It now sits at the lowest level since February 27th.

Aston Martin business is struggling

Aston Martin Lagonda, the iconic British luxury car brand, has had a rollercoaster this year. Its stock jumped to a multi-month high of 395p as investors cheered the turnaround announced by Lawrence Stroll. It also announced an EV partnership with Lucid Motors.

The company also raised additional funds from Geely, the giant Chinese company. Further, the stock jumped after its namesake Formula 1 team saw strong success in the first phase of the season. Recently, however, Fernando Alonso and Lance Stroll have struggled and are being beaten by the likes of Mercedes and McLaren.

Aston Martin’s recent financial results showed that the company’s growth was stalling. Its total volume sales rose by just 4% in the third quarter to 1,444. For the year so far, the volume rose by 8% to 4,398. Its revenue rose by 15% to 316 million pounds while its operating loss narrowed to 52.1 million pounds.

While Aston Martin is seeing strong demand for its supercars, the company is still facing operational challenges. In the most recent quarter, the company’s DB12 production was affected by supply issues.

Therefore, the main reason you should avoid Aston Martin shares for now is that these operational challenges will continue. Further, past bets on the stock have ended badly for most investors.

Buy Ferrari stock instead

Ferrari vs Aston Martin stocks

I believe that Ferrari is a better investment than Astin Martin. For one, the Italian company has a bigger brand than Aston and a longer track record of performance. Its stock has jumped by over 155% in the past five years while AML shares have dropped by double-digits. 

In its most recent results, Ferrari said that its revenue jumped by 24% YoY as deliveries rose by 9% to 3,459. Its adjusted EBITDA jumped by 37% in the quarter, beating analysts’ estimates.

Most importantly, Ferrari said that its order book was still string. It expects that its annual revenue will come in at 5.9 billion euros while its EBITDA will be 2.25 billion euros. Therefore, while Ferrari is quite overvalued, it has demonstrated that it can grow even as the richsession continues.

The challenge for most investors is that Aston Martin and Ferrari are listed in the UK and UK, respectively. UK investors can still buy the shares through popular brokers like Hargreaves Lansdown and Interactive Brokers.

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