Citi initiates Aston Margin Lagonda at 'buy/high risk'

Citi initiated coverage of shares of luxury car maker Aston Martin Lagonda with a ‘buy/high risk’ rating on Thursday and 600p price target.

It said the AML brand and strategy is sound but the business is now exposed, having been left undercapitalised since its IPO and is now in a position where it has "pressing short-term cash needs".

Nevertheless, with the shares trading at a sharp discount to peers, the bank said there is a potentially high return opportunity for investors even if this does come with a considerable degree of risk.

"In short we see three key hurdles the business needs to negotiate in 2020 (capital injection, successful DBX launch and resolution of Vantage problems) and with shares currently discounting a circa 15% cost of equity believe the risks associated with delivering this are sufficiently priced in," Citi said.

"Under our bull scenario in which discounted cash flow metrics converge with those of Ferrari we could see potential upside to 3,000p."