2023-05-05 18:54:41 ET
Summary
- Joby Aviation completed a stock offering to raise another $180 million, with the stock trading at $4.
- The eVTOL manufacturer recently expanded a deal with the DoD, which includes the delivery of 2 aircraft to the U.S. Air Force in early 2024.
- Joby Aviation stock is cheap, trading at all-time lows, while the company remains on target for aircraft certification and production launch in the next year.
As Joby Aviation, Inc. ( JOBY ) quickly moves towards launching production of electric vertical takeoff and landing (eVTOL) aircraft, the company completed a strategic public offering to solidify their financial position. Joby Aviation is closer to production launch of their eVTOL program than the market appears to realize. My investment thesis is ultra-Bullish on the stock, with the additional funds raised at a reasonable price to extend the runway to reach profits.
Heading Towards Production
A few weeks back, Joby Aviation released interesting expanded plans with the Department of Defense ("DOD"). The company announced the SPAC deal all the way back in early 2021, and the market has likely missed how quickly the eVTOL company is moving towards aircraft production.
The expanded deal with the DOD includes an expansion of the contract value by $55 million to a total value of $131 million. The U.S. Air Force contract includes plans for delivering nine of the five-seat aircraft, with the first two aircraft expected to be delivered to the Edwards Air Force Base by early 2024 after four Air Force pilots were trained on the aircraft.
As the calendar has flipped into May 2023, these deliveries would have a target delivery data within the next year. In fact, the CEO remains clear the first production unit will roll off the assembly line in the 1H of this year per this statement on the Q1'23 earnings call (emphasis added):
For example, at our site in Marina, California, on one side of the airport, the team at our pilot production line is knocking it out of the park as we prepare our first company conforming aircraft to be rolled out as planned in the first half of this year.
Joby Aviation continues to make a ton of progress on working with the FAA to certify their aircraft. The company still has a goal of operating an airline by 2025.
Per CFO, Paul Sciarra, the company should be able to report revenues in 2024 from the aircraft delivered to the DoD as follows:
When we think about this contract, it's about -- there's really three pieces. One is an activation fee on delivery of aircraft. The second is an annual fee. And the third is a cost per flight hour. So that's the way that we've structured our relationships. And we think it's a win-win, both for us as a company and for our customers with the Department of Defense.
Key Capital Raise
On May 3, Joby Aviation completed a public offering of 44 million shares . The company raised ~$180 million prior to deducing offering expenses.
The key here is that Joby Aviation was able to raise cash with the stock price still at a reasonable level. The stock went public via a SPAC transaction at $10, but a lot of peers in the eVTOL sector and other SPACs now trade in the $1 range, limiting the ability to raise additional cash without massively dilutive transactions.
The company has a market cap of ~$2.9 billion heading into the secondary offering. Just as important, Joby Aviation had nearly $1 billion worth of cash exiting the March quarter, and this cash provides the financial strength to accelerate early production plans.
The company reported an adjusted EBITDA loss of $75.4 million in the quarter, up $5.7 million YoY. The total cash burned from operations during the quarter was $78.6 million, with another $8.8 million for equipment purchases.
Joby Aviation plans to burn ~$370 million in cash this year, so this capital raise alone covers nearly half of the cash. The company would end the year with an $800 million cash balance versus the prior plan to start 2024 with ~$620 million.
While the company clearly doesn't appear to need the cash and analysts on the Q1'23 earnings call were obsessed with the cash raise providing a major signal, the capital raise was just prudent, given that other eVTOL players are struggling with capital needs. Remember, analysts aren't forecasting big revenue numbers until 2026.
The Joby Aviation, Inc. revenue targets are far below the original forecasts, though the company still appears on target with most aircraft certification goals.
Takeaway
The key investor takeaway is that the market appears to have lost interest in Joby Aviation, Inc. just as the company is set to achieve eVTOL aircraft certification and launch production. The business still has a long time until material revenues appear, but the Joby Aviation, Inc. stock risk is disappearing with the capital raise and progress towards aircraft production.
Investors should use the ongoing weakness in Joby Aviation, Inc. stock to start building a position.
For further details see:
Joby Aviation: Strategic Cash Raise