£10,000 invested in Aston Martin shares 1 month ago is now worth…

It’s certainly a possibility that Aston Martin (LSE:AML) shares may cease to exist in a couple of years. The business is struggling under the weight of its debt repayments and has reported some operational difficulties.

The stock is now down 21% over the last month. And this compounds earlier losses, with the stock falling 69% over 12 months. In other words, a £10,000 investment made a month ago would be worth just £7,900 today.

Management says things will improve

The luxury carmaker’s debt burden has grown substantially, reaching £1.2bn by the end of 2024. This represents a 43% increase from the previous year. Despite a rise in average selling prices to £245,000, overall revenue fell by 3%, driven by a 9% decline in wholesale volumes due to supply chain disruptions and weaker demand in China .

These financial struggles have forced Aston Martin to cut costs. The Grayson-headquartered company recently announced a 5% reduction in its workforce, aiming for annual savings of £25m, 50% of which will be realised in 2025. However, after reporting a £289.1m loss — up from £239.8m the year before — it’s clear that there’s a lot to do to get this company back in the black.

Management has pinned hopes on its restructuring efforts and new product launches for 2025. The Valhalla, Aston Martin’s first mid-engine plug-in hybrid supercar, is expected to boost sales and reposition the brand in the ultra-luxury market. Aston Martin anticipates mid-single-digit growth in volumes and positive free cash flow in the second half.

However, there are more than a few potholes for Aston to navigate. Trump may slap a 25% tariff on UK carmakers, in what could be a significant blow to an industry that is already struggling.

Experts cast doubt on recovery

I had once been rather bullish on Aston, taking some of its own forecasts at face value. However, things haven’t gone entirely to plan and debt continues to grow at quite the pace.

Analysts forecasts don’t paint a particularly positive picture. The stock isn’t expected to reach positive earnings per share (EPS) in the forecasting period — through 2027. And net income only turns positive in the final year. Meanwhile, analysts see debt reaching £1.35bn in two years.

What’s more, the consensus among analysts is now a Hold. This reflects the broad uncertainty about the company’s future, with just one Buy rating and one Outperform rating. The average share price target — 97% higher than the current price — may be a little misleading.

The bottom line

An investment in Aston Martin today could be highly rewarding. Its peer, Ferrari, trades with incredible earnings multiples, making the prospect of a profitable Aston Martin very enticing. But the risks are substantial and the further dilution of shares is very possible. What’s more, the business has overpromised and under delivered in recent years, and, as a result, may struggle to truly convince investors that a turnaround in on the cards. Momentum counts for a lot. Personally, I’m going to watch from the sidelines. I’m not buying Aston Martin stock anytime soon.

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James Fox has no positions in any of the companies mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.