JOBY - Joby Aviation: Another Dip Opportunity

2023-10-05 18:20:32 ET

Summary

• Joby Aviation, Inc. stock has dropped nearly 50% since June despite positive developments, making it an attractive investment opportunity at $6.
• The company has started flight tests with pilots on board, moving closer to FAA certification.
• Joby plans to develop a production facility in Ohio capable of producing 500 aircraft per year, further supporting its path to commercialization.
• The revenue timeline remains cloudy, but Joby is building a multi-billion dollar business.

Some of the best investments in the stock market provide investors with multiple opportunities to buy on major dips before making large runs. Joby Aviation, Inc. ( JOBY ) is one of those scenarios, with the stock of the electric vertical take-off and landing (eVTOL) manufacturer collapsing nearly 50% since the June surge despite several positive developments. My investment thesis remains ultra Bullish on JOBY stock, especially down here at $6.

Positive Developments

Just yesterday, Joby Aviation announced the company has started flight tests with pilots on board. The company is making step after step towards ultimate FAA certification.

Joby now has pilots testing aircraft at both their production facility in California and at Edwards Air Force Base. Both Joby pilots and U.S. Air Force pilots are testing the aircraft after the company delivered the first eVTOL to the U.S. Air Force about 6 months ahead of plans for a delivery in early 2024, as part of the $131 million contract.

Another major development was announced a few weeks back, the plans to develop a production facility in Dayton, Ohio capable of producing 500 aircraft per year. Joby will invest up to $500 million in the facility, with plans for aircraft from the facility to be part of the aerial ride-sharing network to be launched in 2025.

Another Dip

Joby continues to make great progress towards the plan for aircraft certification in 2024. Despite the positive news in the last couple of months, the stock has fallen nearly 50% from the highs back to $6.

All the positive developments in the last few weeks should only reinforce the path to commercialization. A lot could still go wrong with FAA certification, but Joby Aviation appears far closer to the question of "when" and no longer "if" it comes to certifying an eVTOL.

A lot is still unknown about the expectations for the revenue stream, with no major updates since the SPAC deal announcement. The consensus revenue targets have dipped to minimal expectations, probably not in line with the progress Joby has made during 2023 to remain close to the original targets.

Analysts now only forecast Joby to deliver $84 million in revenues during 2025, while the company is building a production facility capable of 500 aircraft following certification in 2024. The company would appear capable of far higher sales in the next couple of years, especially considering the U.S. Air Force contract has a value of $131 million.

The stock likely makes another run, as the management team will increasingly start shifting towards discussing the revenue upside from aircraft certification and production in Dayton. Joby Aviation only appears slightly behind its original targets of having revenue-generating aircraft in 2024 via 1 city for a ride-sharing service. The company didn't forecast material revenues until 2025, with the majority of the revenues actually coming from generating over $500 million from selling new aircraft.

The original plan is slightly confusing since the large amount of revenue-generating aircraft listed for 2024 don't actually generate revenues. Joby Aviation still appears on the path to launching the ride-share service in 2025 when the company originally forecasted, producing $186 million in revenues from this service with just 2 cities launched.

Joby Aviation has announced plans to operate air taxi services for Delta Air Lines ( DAL ) after an investment by the large airline. The eVTOL manufacturer appears more focused on operating a ride-sharing service over selling aircraft now.

The stock has a market cap of just $4.3 billion. The odd part here is that Joby has fallen nearly 40% since the SPAC deal, yet the company already has a working eVTOL with the U.S. Air Force and several years of solid progress have passed since going public via the SPAC.

The company ended the last quarter with over $1.2 billion in funds to build the business making Joby Aviation one of the better capitalized players in the eVTOL space. The eVTOL manufacturer produced an adjusted EBITDA loss back in Q2 2023 of $83 million while remaining on the path to spending $360 to $380 million this year on operating activities and equipment purchases.

Takeaway

The key investor takeaway is that the revenue timeline still remains cloudy, but the business remains one where Joby Aviation, Inc. potentially starts producing billions of dollars in annual revenues at scale. The stock valuation remains attractive here on dips as the company builds a global aircraft production and ride-sharing service.

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