Contemplating Investing in Joby Aviation Shares Below the $10 Mark?
Joby Aviation (JOBY -6.05%), a company specializing in electric vertical takeoff and landing (eVTOL) aircraft development, hasn't impressed investors post-initial public offering (IPO). Merging with a special purpose acquisition company (SPAC) on Aug. 10, 2021, Joby's stock debuted at $10.62, but trades around $8 today.
Disappointing investors with falling below projected earnings and facing tough competition from eVTOL rivals as economic factors affect their valuations, Joby still has five "buy" ratings, three "hold" ratings, and one "sell" rating from financial analysts. With an average price target of $7.47 and a highest target of $10, is buying Joby's stock worthwhile at its current price below $10?
A pioneer in a burgeoning sector
Over the past decade, many companies focused on creating eVTOL aircraft to offer more affordable, eco-friendly, faster, and quieter alternatives to traditional helicopters, especially in urban areas.
Joby is one of the early movers in this emerging market. The company's first commercial eVTOL aircraft, the S4, can carry one pilot and four passengers, reach a maximum speed of 200 mph, and travel up to 100 miles per charge. They're also developing a hydrogen-powered variant with double the range.
Joby partnered with the U.S. Department of Defense (DOD) in 2016 and landed a $131 million Agility Prime contract to deliver up to nine eVTOL aircraft to the U.S. Air Force. Joby provided its first eVTOL aircraft to Edwards AFB last September, with plans to provide two more to MacDill AFB in 2025.
With investments from notable names like Toyota (TM -1.93%) in 2020 and Delta Air Lines (DAL -0.88%) to facilitate "home to airport" eVTOL flights in 2022, Joby has all the makings of a promising venture.
Why isn't Joby Aviation's stock rallying?
Support for Joby's expansion encouraged expectations that the company could make significant progress in its business. However, much like other SPAC-backed startups, Joby fell short of delivering on some ambitious projections. In its pre-merger presentation, Joby predicted a massive revenue surge from $131 million in 2024 to $2.05 billion in 2026. In reality, Joby only made $81,000 in revenue over the first nine months of 2024, with analysts expecting $131,000 for the full year and a further climb to $23 million in 2025 and $97 million in 2026.
Joby's decision to report the full value of its Agility Prime contract ($131 million) as projected 2024 revenue was problematic. This practice should have spread the revenue recognition over multiple years. Archer Aviation, a competitor, is projected to grow from $593,000 in 2024 to $38 million in 2025 and then $185 million in 2026, while Joby faces competition from other startups, established aerospace companies like Boeing, and even automakers like Hyundai.
Some positives, but also concerns
Despite these challenges, Joby's business has grown. Expanding operations in South Korea, constructing an air taxi hub in Dubai, and completing Japan's first air taxi flight with Toyota are compelling developments.
In November 2023, Joby passed a series of major aerostructure tests to obtain certification from the U.S. Federal Aviation Administration (FAA). FAA rules for air taxi services were finalized in 2022, and certification could enable quick launch of Joby's anticipated domestic air taxi routes with Delta Air Lines.
Joby's insider selling trends are concerning. Over the past 12 months, Joby insiders sold nearly twice as many shares as they bought, while Archer's insiders bought more than six times as many shares as they sold. Joby's CFO Matt Field, who oversaw the company's IPO, recently resigned.
Joby's valuation is another issue. With an enterprise value of $5.8 billion, Joby still trades at a multiple of 60 times its 2026 sales. Archer, with an enterprise value of $3.5 billion, trades at half that price, making Archer a more appealing choice for investors.
Joby seems promising as an eVTOL market gamble, but it's best to wait for more green flags before investing. As of now, Archer Aviation seems to present a better long-term investment opportunity for the eVTOL and air taxi market growth.
Despite Joby Aviation's promising partnerships and advancements in eVTOL technology, its stock performance has been lackluster due to missing financial targets and stiff competition. In light of this, some investors are considering investing in Joby's rival, Archer Aviation, which has a lower valuation and stronger financial projections. When it comes to finance and investing, it's crucial to consider all aspects of a company's financial health and market potential before making an investment decision.
