(Bloomberg) -- Bank of America Merrill Lynch downgraded Aston Martin Lagonda to underperform, becoming the first of the bookrunners in the company's initial public offering to recommend selling the shares.
The luxury British carmaker may need to cut 2019 margin guidance again due to weak near-term demand, analysts including Kai Mueller wrote in a note to clients, slashing their price target 27% to 400 pence a share. The stock fell as much as 8% to 437.1 pence apiece on Monday. They went public last year at 1,900 pence.
BofAML was one of four bookrunners responsible for pricing, executing and underwriting Aston Martin Lagonda Global Holdings Plc's IPO just over a year ago. Two of the others, Credit Suisse Group AG and HSBC Holdings Plc, have neutral ratings, while UniCredit SpA doesn't have a recommendation.
The stock is the worst performer on the U.K. FTSE 250 benchmark in 2019, tumbling amid concern over its cash position ahead of the launch of its first ever sports utility vehicle, the DBX. The firm was forced to issue new debt at double the cost of its existing bonds in September.
The issuance was “only a temporary fix,” and Aston Martin may need to raise more equity in 2021, BofAML wrote. “The company would not be well positioned for any external shock with close to no more borrowing capacity.”
To contact the reporters on this story: Joe Easton in London at jeaston7@bloomberg.net;William Canny in Amsterdam at wcanny3@bloomberg.net
To contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, Jon Menon, Monica Houston-Waesch
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