Joby Aviation Faces Challenges After SPAC Merger: What’s Next for the eVTOL Innovator?
Joby Aviation (NYSE: JOBY), a company focused on electric vertical takeoff and landing (eVTOL) aircraft, went public by merging with a special purpose acquisition company (SPAC) on August 10, 2021. The stock began trading at $10.62 and closed its first day at $13.40, but now it trades around $5.
Like many SPAC start-ups, Joby disappointed early investors by falling short of its pre-merger projections. It must also contend with competition from other SPAC-backed eVTOL companies like Archer Aviation and major players in aerospace and automotive industries such as Boeing and Hyundai.
Image source: Joby Aviation.
The rise in interest rates has dampened the market’s enthusiasm for speculative, pre-revenue firms like Joby Aviation. However, with rates now declining and production ramping up, investors are left wondering if Joby’s stock could climb higher in the next three years.
Examining Joby Aviation’s Business Model
Fifteen years ago, NASA released a concept video showcasing an eVTOL aircraft taking off, hovering, and landing like a drone. It gained massive attention, sparking the creation of similar prototypes by various companies including Joby, which was founded that same year.
Operating in “stealth mode” for over a decade, Joby captured a significant investment from Toyota in 2020. In 2022, Delta mirrored United‘s investment in Archer Aviation by putting $60 million into Joby to facilitate “home to airport” flights.
Joby began collaborating with the U.S. Department of Defense (DOD) in 2016 and currently holds a $131 million Agility Prime contract to deliver up to nine eVTOL aircraft to the U.S. Air Force. The first aircraft was delivered to Edwards Air Force Base (AFB) last September, with plans to deliver two more to MacDill AFB by 2025.
Joby’s initial commercial eVTOL model, the S4, is designed for air taxi services. It accommodates a pilot and four passengers, can carry up to 1,000 pounds, and travel up to 100 miles at speeds up to 200 mph on a single charge. This positions it as a competitor to Archer Aviation’s Midnight eVTOL. Additionally, Joby is developing a hydrogen-powered model that could have over five times the range of its current offering.
In the next few years, these eVTOLs could potentially replace traditional helicopters, as they are generally cheaper, quieter, faster, and more suited for urban landings. According to Fact.MR, the global eVTOL aircraft market could grow at an impressive compound annual growth rate (CAGR) of 21.5% from 2024 to 2034.
Will Joby Aviation’s Business Really Take Off?
The future appears bright, but Joby initially projected $131 million in revenue for 2024, stating it would reach $721 million in 2025, followed by $2.05 billion in 2026.
However, during the first half of 2024, Joby only managed to generate $53,000 in revenue, resulting in a net loss of $217.9 million. Analysts predict it will generate about $430,000 in revenue for the full year, with a staggering net loss of $496.9 million.
It seems Joby misrepresented the full potential value of its Agility Prime contract to SPAC investors when projecting $131 million as its expected revenue for 2024. Payments from government contracts are typically distributed in smaller amounts over several years, unlike immediate payments upon delivery.
This apparent overestimation, combined with unrealistic future revenue predictions, prompted initial investors to exit. Looking ahead, analysts expect Joby’s revenue to grow to $25.8 million in 2025, and then to $103.9 million in 2026 as production increases.
Where Might Joby’s Stock Be in Three Years?
With an enterprise value of $3.08 billion, Joby remains highly valued at 30 times its projected sales for 2026. In contrast, Archer, which has also started delivering its Midnight eVTOL, trades at merely seven times its estimated sales for the same year. This discrepancy could explain why Joby’s insiders have sold nearly 90% as many shares as they’ve acquired over the past year, while Archer’s insiders have bought 25 times the number of shares they sold in that timeframe.
Joby is unlikely to declare bankruptcy soon, as it ended the latest quarter with $825 million in cash, cash equivalents, and marketable securities and a low debt-to-equity ratio of 0.2. However, the company has increased its share count by almost 20% since going public and recently launched a $202 million offering to raise additional funds.
In the upcoming three years, Joby’s stock is set to either stagnate, depending on the achievement of its delivery goals, or decline if further delays occur. A significant increase seems improbable due to already high growth expectations embedded in its current valuations. For investors seeking better opportunities in the eVTOL market, Archer Aviation may be the more favorable choice.
Is Investing $1,000 in Joby Aviation a Wise Move Right Now?
Before deciding to invest in Joby Aviation, you should consider:
The Motley Fool Stock Advisor analyst team has identified what they view as the 10 best stocks to invest in currently… and Joby Aviation is not among them. The selected stocks are believed to offer substantial returns in the next few years.
For instance, when Nvidia was chosen on April 15, 2005, if you had invested $1,000 at that time, you’d have $865,595!*
Stock Advisor offers investors a straightforward guide to building a successful portfolio, featuring regular analyst updates and providing two new stock picks each month. Since 2002, the Stock Advisor service has more than quadrupled the returns of the S&P 500.
See the 10 stocks »
*Stock Advisor returns as of October 28, 2024
Leo Sun has no position in any of the stocks mentioned. The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
