Aston Martin Bear Says It Needs a Billion Pounds to Catch Up With Ferrari

(Bloomberg) -- The only analyst with a sell rating on Aston Martin Lagonda shares says the luxury carmaker will need to raise at least a billion pounds ($1.25 billion) in fresh capital in order to remain competitive with rival Ferrari NV while reining in its net debt.

Aston Martin’s shares have plunged about 32% in two days after the company that went public in October reduced its guidance for full-year wholesale unit sales on Wednesday. Its value has slumped 63% since the high-profile trading debut.

What should be most worrying for investors about this week’s update “is not that volumes are likely to be 11% below expectations but that the management is cutting capex,” Panmure Gordon’s Sanjay Jha wrote. The analyst complained in June that the initial public offering had been used as a payday for existing investors, rather than raising funds for future development.

Pressure to keep net debt under control now raises the risk that the company will be forced to curtail, or even abandon, its so-called Second Century Plan, according to Jha. Introduced in 2015, the strategy aims to produce seven new models by 2022, while also improving profitability and cash generation.

Jha cut his price target to 543 pence a share from 802 pence, suggesting a further 22% downside from Thursday’s low of 692 pence a share. Among the other nine analysts surveyed by Bloomberg, five have buy ratings and four rate the stock hold.

To contact the reporter on this story: Joe Easton in London at jeaston7@bloomberg.net

To contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, John Viljoen, Kasper Viita

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