The Sky’s The Limit for Joby Aviation (JOBY), Here’s Why

Founded in 2009, Joby Aviation, Inc. (JOBY) is a California-based transportation company that develops an all-electric vertical takeoff and landing aircraft (eVTOL) that will operate as an air-taxi service. 

Joby Aviation became public on the Nasdaq through a SPAC deal with Reinvent Technology Partners that took place on August 11th. The company’s cash on hand and proceeds from the merger deal are equal to about $1.6 billion, which is anticipated to fund the company’s operations until a commercial stage. It’s important to note that the stock ended its first trading session at $13.40, up 33.6% for the day. However, the stock has since given back those gains and is down 14% year-to-date (YTD).

Today I’ll analyze JOBY to determine whether this is a good aircraft stock to add to your portfolio.

Industry Outlook

Even though the eVTOL industry is in the early stage of development, it represents a multi-trillion-dollar opportunity in the coming decades. According to Precision Reports, the global eVTOL Aircraft market is projected to reach $97 billion by the end of 2027, growing at a CAGR of 11.1% during 2021-2027. Also, Morgan Stanley is bullish on the eVTOL market, projecting industry revenue of $1 trillion by 2040 in the base case. In addition, Morgan Stanley recently started coverage of JOBY stock, establishing an “overweight rating” with a price target of $16.00. 

Recent Developments

On September 1st, Joby Aviation partnered up with NASA to measure the noise footprint from the eVTOL aircraft under NASA’s Advanced Air Mobility (AAM) National Campaign. NASA plans to use over 50 ground-plate microphones to determine the noise levels of JOBY’s aircraft and compare them to that of other aircraft such as drones, helicopters, etc. 

On July 27th, Joby Aviation announced that it had achieved a valuable milestone with its eVTOL aircraft. The company’s full-size prototype vehicle was able to fly 154.6 statute miles on a single charge. In addition, JOBY’s vehicle utilizes lithium-ion batteries, which makes this achievement even more impressive. The company’s commercial aircraft is expected to fly up to 150 miles at 200 mph, bringing in four passengers and a pilot on board. 

Dive into the JOBY Business Model

Joby Aviation affirms that its aircraft is 100x quieter than a helicopter while offering 4x cost per mile improvement over its aerial counterpart. The company aims to perform an FAA certification flight test around mid-2022, which could be a significant milestone for the company.

The company has key partnerships with industry leaders, helping to accelerate its product launch. JOBY’s partnership with Toyota aims to de-risk and accelerate its manufacturing capabilities. The company also partnered with Uber by acquiring Uber Elevate for de-risk demand generation. Under the terms of the deal, Joby will appear in the Uber app on a non-exclusive basis.

The company also has an experienced management team, including names from such well-known brands as Tesla, Uber, Ford Motor Company, JetBlue Airways Corp., and others. This experience gives a lot of confidence in the company’s feasibility prospects. 

Finally, JOBY expects to generate its first revenue of $131 million in 2024, with 134 aircraft being launched in one city. JOBY expects a payback period to be 1.3 years, assuming a contribution margin of $1 million per plane (Company’s IR, Slide 85). However, applying more conservative assumptions such as a lower amount of flights per day or higher expenses, the payback period could be extended to 2+ years. 

The company plans to become profitable in 2025, registering total revenues and Adjusted EBITDA of $721 million and $185 million, respectively. These figures assume a total number of planes of 413 as well as operating activities in two cities (Company’s IR, Slide 31). 

The Bottom Line

Though the air-taxi industry might seem like something out of the Jetsons cartoon, Joby Aviation is making strides to make this technology a reality.  Like in all emerging industries, there are no guarantees of success.  However, for those investors willing to take on increased risk, I believe that JOBY could be a worthwhile investment.  And the stock’s recent pullback is giving us a more attractive entry level.

And I’m not the only bull on JOBY.  Morgan Stanley’s Kristine Liwag issued a Buy rating on the stock with a $16 price target, which represents 60% upside potential.