Aston Martin (LON: AML) share price has pulled back in the past few days after going through a short squeeze earlier this month. The stock was trading at 220p on Thursday, ~26% below the highest level this year.
Short-squeeze fades
Aston Martin, the iconic British hypercar manufacturing company, is implementing a turnaround strategy after years of turmoil that saw its stock crash to a record low in 2022. The company has worked to repair its balance sheet by raising over 600 million pounds in 2022.
As part of the capital raise, the firm welcomed Saudi Arabia as the anchor shareholder. This is important because Saudi Arabia seems to have unlimited finances. The country has also invested in many other companies, including Lucid.
Aston Martin’s successful turnaround is best seen in the performance of its sponsored Formula 1 team. The team, which is owned by Lawrence Stroll, has been the best-performing this year. It has 38 points in the constructor’s championship, making it the second after Red Bull. This is notable considering that the team had 55 points in 2022.
Therefore, there is a likelihood that this success will lead to more demand. In fact, in its most recent statement, the company said that most of its high-end vehicles were already sold out, signaling that there is still demand.
Aston Martin hopes that its wholesale units will be 7,000 this year, which is higher than the 6,412 it sold in 2022. It hopes to grow this figure to 10,000 by 2025. It also hopes that its adjusted EBITDA margin will be about 20% and that its revenue will hit 2 billion pounds in the medium term.
Aston Martin seems well-positioned for a turnaround since its balance sheet seems strong, with net debt being at 766 million pounds. There is also strong demand for its products in key geographies like Asia, Europe, and North America.
Aston Martin share price forecast
AML chart by TradingView
The daily chart shows that the AML stock price has made a break and retest pattern by moving to the key level at 214p. This was an important level since it was the highest point on September 12. In technical analysis, this pattern is usually a sign of continuation. The stock has moved above all the 25-day and 50-day exponential moving averages.
Therefore, there is a likelihood that the stock will bounce back as buyers target the year-to-date high of 306p. This price is about 36% above the current level.
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