Analysts are turning more bullish on Aston Martin Lagonda Global Holdings Plc after news of increased Chinese funding for the British luxury carmaker.
(Bloomberg) — Analysts are turning more bullish on Aston Martin Lagonda Global Holdings Plc after news of increased Chinese funding for the British luxury carmaker.
One broker, Mediobanca S.p.A., reversed a three-year recommendation to clients that they sell the stock, assigning an outperform rating. Oddo BHF followed suit, having been neutral on the shares for more than 18 months. Barclays Plc reiterated an overweight view and increased its price target.
The shift in sentiment follows Thursday’s announcement that Geely Automobile Holdings Ltd. added £234 million ($290 million) to double its stake in the Warwick, England-based company. Since a high-profile initial public offering in 2018, Aston Martin has been pressured by concerns around its balance sheet and weak sales, but the injection of fresh funds is easing those worries for investors.
“We rate this deal as very positive for Aston,” Mediobanca analysts Andrea Balloni and Isacco Brambilla wrote in a note. A potential strategic partnership with Geely will improve Aston Martin’s penetration in China and, more broadly, the move boosts the carmaker’s outlook and increases its M&A appeal, they said.
Mediobanca downgraded the stock to underperform in February 2020, according to data compiled by Bloomberg. The shares have fallen about 67% since then.
“The cash injection is welcome considering the group’s precarious financial position,” Oddo’s Anthony Dick wrote in a note, adding that it should allay fears of a new capital increase. Aston Martin will receive about £95 million in cash as part of the transaction, according to Thursday’s statement.
Geely is paying 335 pence a share for the added stake, made up of shares held by Chairman Lawrence Stroll’s Yew Tree consortium and also new stock, a 45% premium to Aston Martin’s closing price on Wednesday. Aston Martin rallied as much as 25% on the news.
Barclays analyst Henning Cosman said in a note that the price paid reflects Geely’s “extreme eagerness” to explore joint technology synergies with Aston Martin and the Chinese company’s brands such as Lotus, the British supercar maker.
Barclays increased its price target to 300 pence per share from 250 pence, though that’s below Mediobanca’s 360-pence target — the highest among analysts surveyed by Bloomberg.
The shares were 1.5% higher at 263.8 pence as of 12:40 p.m. in London.
–With assistance from Sam Unsted and Blaise Robinson.
(Adds Oddo, Barclays comments; updates share price.)
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