Aston Martin’s $6.5 Billion IPO: Good Timing for Who Exactly?

Aston Martin is riding Ferrari’s bumper with its proposed IPO launch that values the company at around $6.5 billion.

It’s on track to sell between 6,200 and 6,400 cars this year, with projected sales of around $1.26 billion…

So, that looks like a monster valuation, at around five times sales and as much as 60 times earnings, which are only forecast at $113 million this year.

Still, on closer inspection, it’s obvious that Aston and the ultra-luxury market is on a roll and the company’s looking to expand into Asia more aggressively with projections of selling 7,200 or 7,300 cars in 2019.

There’s good reason that this sector is doing so well, although it is hypersensitive to the economy, especially this bubble economy.

In July 2008, I was interested in the new, really sexy, two-door Maserati coupe. I went to the dealer and he told me to put down a deposit that same day to ensure I got one. They were backordered for months. And, of course, I was lucky he “wasn’t charging a premium.”

That was a warning signal to me as the stock bubble back then was already starting to burst.

So, I waited.

I went back to that same dealership in February 2009, just seven months later, when the stock market was bottoming. I got the car with a 25% discount! I got the dealer AND manufacturer’s margin as savings.

Obviously, the high-end car market does very well when the rich are doing well, but that can reverse quickly.

I can see the shape of this luxury car bubble even more clearly from the major updates we are doing to our Spending Waves book, that will be ready for you in October.

The bubble boom, especially since 1995, has made the older and the most affluent richer because they own most of the financial assets that are bubbling.

In turn, cars, especially the luxury segment, are one of the most responsive to bubbles and a strong economy.

Look at the change in where auto spending peaked between the 1996-1998 period and the 2014-2016 period more recently.

This shows us (as I’m sure some of the other charts we’re updating will) that peak spending has shifted over the last 18 years from age 50 to age 64. Guess what else peaks at age 64? Net worth.

Car buying has been following peak wealth more than peak income and spending!

Splurge and buy that dream car… especially if you’re older, have less obligations, and are richer from huge capital gains!

But, would I buy into Aston Martin’s IPO at these valuations? Especially considering this final and even more extreme stock bubble is likely to peak within a year (if not less)? Or would I buy an Aston Martin car?

No on both counts!

I suggest, as I did in 2008, that you wait until 2020-21 or so, when this next bubble has burst, before you get behind this particular wheel.

Yes, the global ultra-luxury car industry has been on a tear, growing from 62,027 in cars in 2015 to 86,148 projected this year. That’s a 39% increase in just three years.

But that won’t last, especially if I’m right about this greatest bubble bursting starting by early 2020!

Even industry projections are for a slowing of sales down to 85,614 in 2020 as they see this market getting saturated.

Great deal for Aston, bad deal for investors…

And just another sign of a major bubble peaking!