By essentially tripling in value so far this year, electric vertical takeoff and landing (eVTOL) aircraft manufacturer Joby Aviation (NASDAQ:JOBY) offers speculators one of the most exciting market opportunities. At the same time, new prospective investors should watch where they step before boarding the enterprise. Certain factors must align favorably for the innovator to be a comfortably viable proposition. Therefore, I am presently neutral on JOBY stock.
Pick the best stocks and maximize your portfolio:
- Discover top-rated stocks from highly ranked analysts with Analyst Top Stocks!
- Easily identify outperforming stocks and invest smarter with Top Smart Score Stocks
New Vertical Mobility Prospect Supports JOBY Stock
While artificial-intelligence-empowered chatbots may end up being the biggest winner of 2023, JOBY stock more than holds its own regarding the generation of excitement. Last week, JOBY managed to gain over 62%. In the trailing month, it shot up over 80%. Fundamentally, the eVTOL specialist benefits from effectively facilitating a new vertical plane of personal mobility.
Although helicopters may have just entered the chatroom, the reality is that eVTOLs command superior advantages on paper. First off, they’re quieter than helicopters. The latter platform emits on average 87 decibels of noise when it’s flying at 500 feet. For context, a lawnmower emits about 90 decibels of noise. Moreover, they’re faster and use less fuel, potentially offering cheaper mobility solutions at scale.
Therefore, when the U.S. Federal Aviation Administration (FAA) granted Joby a special airworthiness certificate – which was issued for an aircraft constructed at Joby’s Marina pilot production facility in California, per TipRanks reporter Marty Shtrubel – it came as no surprise that JOBY stock skyrocketed. Because of the FAA certification, Shtrubel pointed out, the company can now initiate flight testing for its production prototype.
Also, to no one’s shock was rising hedge fund interest in the eVTOL manufacturer. As TipRanks contributor Steve Anderson mentioned, hedge funds added another 683,900 shares of JOBY stock to their holdings in the last quarter. Presumably, the latest developments will only bolster the already-positive sentiment among these funds.
Joby Aviation Still Needs to Make the Economies of Scale Work
Based on the headline print, acquiring JOBY stock seems a no-brainer. Fundamentally, the eVTOL platform offers numerous functional and financial advantages over helicopters. Also, as global metropolitan areas expand in population size, more people will likely be willing to pay for convenient travel. Finally, the FAA nod puts Joby in an enviable position. Still, the company needs to make the economies of scale work.
As a business model, Joby intends to deploy an on-demand commercial air taxi operation. For the client, you couldn’t ask for a more convenient travel arrangement. Basically, Joby would be like content streaming, only that you’ll be flown from, say, Boston to New York City. However, if management really intends to go the on-demand route, it needs high volume.
Obviously, eVTOLs aren’t cheap. Experts estimate that such aircraft will cost between $1 million to more than $3 million each to build. At the same time, to achieve such high volume to make JOBY stock viable as a going concern, the underlying company must appeal to a broad audience.
Unfortunately, if economic conditions don’t improve substantively, people may eschew the time savings associated with eVTOLs for traditional mobility services. That would force Joby to target business travelers, which currently represent the lion’s share of airliner profits.
In that case, though, investors of JOBY stock must hope that the workplace normalizes. Otherwise, if everybody works from home, business travel may lose some of its luster.
Financials Emit an Aspirational Ambiance
As a manufacturer of an experimental aircraft, the catalyst for JOBY stock centers on its potential to blossom. Of course, that’s why the FAA disclosure was so important. It’s not just aspirations, but rather, Joby delivered tangible substance to the table. Still, investors must consider the finances.
Right now, Joby runs its show as a pre-revenue enterprise. However, to continue courting institutional investors, management must conduct research and development. Obviously, the expenditures impose burgeoning red ink on the bottom line. As of the most recent quarter, Joby has a retained loss of $848 million.
Nevertheless, JOBY stock benefits from strong backing. Therefore, the company carries a stable, cash-rich balance sheet. Still, Joby will need to continue delivering to achieve more success.
Is Joby Aviation Stock a Buy, According to Analysts?
Turning to Wall Street, JOBY stock has a Strong Buy consensus rating based on three Buys, one Hold, and zero Sell ratings assigned in the past three months. The average JOBY stock price target is $10.00, implying 2.25% downside potential.
The Takeaway: JOBY Stock Impresses, but the Hard Work Lies Ahead
Undeniably, JOBY stock posted impressive numbers, but that’s not the question right now. Rather, investors must ask if shares will continue rising from here. Longer term, it’s a convoluted proposition because Joby needs to achieve economies of scale to make its on-demand business model work. Otherwise, circumstances could get ugly.
