Aston Martin share price has tumbled. Is it a good FTSE 250 stock?
- Aston Martin share price has been in a strong bearish trend.
- It has crashed by more than 95% from its highest level on record.
- The company said it will sell 559 million new shares.
Aston Martin (LON: AML) share price bounced back cautiously on Tuesday as investors assessed the company’s future. The stock rose to a high of 468p, which was about 16% above the lowest level this week. It remains about 96% below the highest level on record.
Aston Martin rights issue
Aston Martin Lagonda is one of the most popular luxury car companies in the world. The company manufactures and sells some of the most iconic brands such as those found in James Bond movies.
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In a regulatory statement on Monday, the company said that it will sell 559 million new shares at 103p each. That was a significant discount considering that the shares are trading at 468p.
The rights issue is part of the company’s strategy to raise 653 million pounds. As part of the deal, Saudi Arabia’s Public Investment Trust will become a leading shareholder in the company. It will use most of these funds to pay its debt, which has soared to more than 1.3 billion pounds.
Aston Martin has been forced to raise cash as its business conditions worsened. In the first half of the year, the company said that its total revenue rose by 9% to 541.7 million pounds. Its adjusted EBITDA rose by 20% to 58.6 billion. As a result, its operating loss jumped by more than 130% to over 89.9 million.
Aston Martin Lagonda has struggled because of the worsening supply chain challenges. As a result, analysts believe that the firm’s revenue growth will be significantly slow this year. The firm said it was facing:
“Challenging operating environment, impacted by the war in Ukraine, Covid-19 lockdowns in China, as well as continued supply chain and logistics disruptions”.
The company is also facing challenges transitioning to electric vehicles. It is yet to choose the type of electric technology to use. Its options include systems from Mercedes-Benz, Lucid, and Britishvolt.
Aston Martin share price forecast
The daily chart shows that the Aston Martin stock price has been in a strong bearish trend in the past few months. It has moved below all moving averages while the Awesome Oscillator has moved below the neutral point.
AML stock has also moved below the descending trendline shown in black. It has also formed an inverted head and shoulders pattern. Therefore, there is a possibility that the stock will have a slight pullback as bulls target the key resistance at 500p.