Wacky Races

Aston Martin issues profit warning

Image source: taustaus - tenor, Martin Onassis @martinonassis, Boomerang Official @boomerangtoons - Giphy, My Portfolio, Michael Shake, Double Brain, Andrii Medvediuk - Shutterstock

What's going on?

On Tuesday, calamitous British carmaker Aston Martin again warned investors its profit would be lower than expected – and its high-speed hijinks hatched havoc for its stock, which sank by a scandalous 16%.

What does this mean?

Aston Martin hit a speed bump back in June when it announced its profit margin would be just 20% – much lower than it’d promised. But now the wheels have completely come off. Aston Martin’s 2019 profit margin will be just 13% due to higher marketing costs than hoped, fewer sales at lower prices than expected (it’s not alone), and a stronger British pound that’s reducing the value of its foreign earnings (tweet this).

Investors might also be worried by Aston Martin’s plans to use $100 million of high-interest debt to shore up its coffers, adding to the $150 million it borrowed back in September. If the carmaker struggles to repay the interest, bankruptcy might not be far behind…

Why should I care?

For markets: Debt’s cool again.
Aston Martin isn’t special: a few companies have rushed to sell European bonds this year, with almost $20 billion worth hawked so far. They might be looking to take advantage of the region’s cheap borrowing costs compared to the US, which could explain the decision from America’s General Mills this week to issue European debt. The same thought apparently hasn’t occurred to Boeing: the aircraft carrier’s reportedly considering issuing more US debt to help tide over the longer-than-expected delays to its 737 MAX production.

The bigger picture: General Moan-tors.
Tesla’s stock rose on Tuesday after the company teased – well, stripteased – the first deliveries from its new Chinese plant. Competition in the world’s largest auto market is hotting up, and rival General Motors has noticed: it announced on Tuesday its Chinese sales will be weak this year. Maybe the connected vehicle software US companies have been flaunting at CES – software that aims to use data to give carmakers an edge – will come in handy…

Originally posted as part of the Finimize daily email.

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