2023-07-17 17:05:29 ET
Summary
- Joby Aviation, Inc. continues making huge progress towards FAA certification of their eVTOL aircraft that seemed a long shot just a few years back.
- The company just recently announced the prototype aircraft rolling off the production line in another big step towards manufacturing readiness.
- Joby stock isn't excessively cheap anymore with the rally back to $10, but the eVTOL leader still only trades at the 2021 SPAC price.
Only a few months ago, Joby Aviation, Inc. ( JOBY ) was raising cash in a strategic capital raise that most investors were questioning. Now, the company appears the clear leader in the nascent eVTOL (electric vertical take-off and landing aircraft) sector, with a clear path towards aircraft certification and production ramp in 2024. My investment thesis remains Bullish on the stock despite the recent major rally back to $10.
Source: Finviz
Path To Certification
In no surprise, Joby has jumped this year as the company has made huge steps towards aircraft certification and ultimate mass production. The eVTOL manufacturer went public back in late 2021 via a SPAC deal, and the long lag until production lead to market disinterest in the concept stock.
Now, Joby has spent a few months discussing major certification steps and new production prototypes, reminding the market the company was always a 2024 story. While this seemed far away in 2020, Joby is now less than a year away from delivering the first eVTOL to the U.S. Air Force after the first production prototype came off the line in late June.
Over the last few weeks, Joby followed the production of the first prototype aircraft with an announced submission of all the Stage 3 certification documents. These documents are crucial for approving the aircraft and allows the company to start focusing on Stage 4 certification where Joby was already 14% through the process back in February.
All of the details have Joby within a year of aircraft certification by the FAA. The market can get behind a stock where target goals become a lot more likely, unlike back in 2021, and even into 2022, where the path to FAA certification appeared daunting.
The company has even forecast aircraft generating revenue in the 1H of next after the first 2 eVTOLs are delivered to the U.S. Air Force in early 2024 as follows:
As part of the contract extension, we'll be delivering and operating up to nine aircraft, the first two of which are set to be stationed at Edwards Air Force Base in California by early 2024. Those aircraft will not only be the first of our aircraft to go into service, they'll be expected also to be the first eVTOL aircraft to be operated for our customer anywhere in the world. They'll be the first eVTOL aircraft to be stationed at a U.S. Military base, and we believe they will become the first eVTOL aircraft to generate revenue in the U.S. and perhaps the world.
More Cash
While a lot of investors didn't appear too excited when Joby Aviation launched the secondary offering back in May. The company sold 44 million shares at only $4.10 to raise an additional $180 million.
The market initially suggested the aviation company was desperate for cash and had limited confidence due to not waiting for higher stock prices. The reality is that most similar SPACs struggle due to limited cash balances to reach profits and Joby solved this problem.
The stock has rallied following the big cash raise due to Joby elevating the company from peers and removing the uncertainty of whether the company has the financial resources to reach full aircraft production. The eVTOL manufacturer even added another $100 million from SK Telecom, adding another key partner to the ecosystem and setting up a path to operating urban air mobility services in Korea.
Joby now has a pro-forma cash balance in the $1.25 billion range and burned $87 million in cash flows in Q1. The company plans to burn ~$370 million this year, leaving Joby with a cash balance of nearly $1 billion when the year ends.
Due to the uncertainty of FAA certification and ultimate launch of the urban mobility service, the company can't really have too much cash at this point. The biggest risk to the investment story is delayed FAA certification burning cash resources, or some type of aircraft failure during testing.
The stock is no longer excessively cheap, with the market cap soaring to $7 billion, but Joby remains a long-term buy. The company has long forecast revenues surging into the billions from both selling aircraft and running the UAM service.
Takeaway
The key investor takeaway is that Joby Aviation, Inc. stock has predictably rallied as the company makes huge progress toward FAA certification and aircraft production. The stock isn't massively cheap after the rally above $10, but the leading eVTOL company is likely to trade with a market cap far above $7 billion when new aircraft start rolling of the production lines next year and into 2025.
For further details see:
Joby Aviation: Several Steps Closer