Summary
- Joby Aviation continues to proceed towards 2024 operations launch.
- The company filed a shelf registration to raise up to $1.0 billion, but the eVTOL manufacturer already has a cash balance of $1.2 billion.
- The stock isn't fully appreciating the business opportunity in the future.
The flying taxi future appears bright, but firms like Joby Aviation ( JOBY ) will spend billions over the next few years to certify and produce new aircraft. The good news for investors is that the eVTOL (electric vertical take-off and landing) manufacturer has plenty of cash to produce aircraft and start operations making the selloff following the proposal of selling securities as irrational. My investment thesis remains Bullish on the stock, as the company gets closer to FAA certification.
Plenty Of Cash
Joby remains one of the best capitalized companies in the eVTOL manufacturing space ending June with a cash balance of $1.2 billion . The company spent $62 million of cash per quarter in the 1H of the year with plans for net cash spending of $320 to $340 million for the year. Joby reduced cash spending for 2022 by ~$20 million through operational efficiencies suggesting a spending rate of nearly $100 million per quarter in the 2H.
At this spending rate, Joby has 3 years of cash to fund development and the company has plans for FAA certification in 2024, which is just 2 years away. Joby has made great progress on certification with Stage 2 Means of Compliance mostly accepted by the FAA with the remaining rules submitted for review and approval.
Remember, Joby is already busy building their first production-intent aircraft. The company is focused on building assemblies of electric propulsion units, battery modules and mission display computers on production lines with scalable processes developed.
The company is far closer to mass production than probably appreciated by the stock market. When the SPAC deal with Reinvent was announced in early 2021, the start of commercial operations in 2024 appeared far off, but Joby Aviation is only about a year away from starting aircraft production.
Future Cash Raise Fears
The stock fell 7% on Wednesday due to Joby filing a preliminary prospectus for up to $1 billion in securities . The shelf registration provides for any combination of common stock, preferred stock or even debt securities to be sold, but the company has sole discretion on whether to actually sell any securities in the future from time to time.
With the SPAC deal, the company projected having the funds to at least reach eVTOL commercialization in 2024 and launch of the urban air mobility service. The company guided to a huge capex boost in 2024 of $552 million jumping to $903 million in 2025.
At some point, Joby will need to raise additional capital to reach full production plans of over 100 aircraft in 2024 and another 250 or so in 2025. As the company approaches commercialization with a $2 billion 2026 revenue target right around the corner, management should be able to raise additional capital, especially in a better market dynamic in 2023 or 2024.
The company has 28.8 million warrants outstanding that could add another $300 million to the cash coffers on the stock price topping $11.50 in the future. The exercise of these warrants would solve some cash needs into 2025 making fundraising simpler after the company has produced far beyond 100 aircraft and the market is more willing to fund expansion.
Joby still has a market cap of $2.5 billion. The company can raise a decent amount of funds here without substantial share dilution. The ideal scenario is clearly this shelf registration being utilized after the market recovers in the next year, but investors need to realize the company quickly starts producing revenues in the billions annually making any capital raise nearly immaterial to the upside potential.
Takeaway
The key investor takeaway is that Joby Aviation is ridiculously priced now and fell irrationally on the company filing for a shelf registration. The company has no need for a capital raise for years. The stock isn't accurately appreciating how close the company is getting towards starting aircraft mass production and FAA certification approval, which should provide key milestones for boosting the stock valuation.
For further details see:
Joby Aviation Doesn't Need Immediate Cash, Don't Panic