Today we're going to talk about an electric vertical take-off and landing (eVTOL) aircraft company. If you've never heard of these look no further -> Joby Aviation
If you don't want to watch the video, the TLDR is: that Joby and other eVTOL's combine the best parts of helicopters and traditional airplanes. It takes off and lands like a helicopter, but cruises at the speed of a turboprop plane. It also is significantly safer than helicopters since there isn't a single point of failure and because it is electric - the plane is significantly cheaper to operate and manufacture.
So now that you're caught up to speed, if you haven't been paying attention, these have been getting a ton of hype around the industry. The amount of dollars being invested into the space is astronomical. In the last several years, Joby alone, has raised close to $1B and they have $0 in revenue. At a valuation of $5.5B, we decided to take a deeper look underneath the hood to see if the stock lives up to the hype. Let's get into it:
Joby Overview:
As we mentioned above, Joby is an eVTOL company. While none of these companies products are in the market today, a ton of companies are working in the background to get these live in the next decade or so. One of the main reasons it has and will continue to take so long is due to the FAA. The FAA (Federal Aviation Administration) has one of the toughest approval processes in the world and that is why flying is the safest form of mass transportation in the United States. However just because they're not live yet, doesn't mean that what they're building is completely speculative so far.
Joby is actually a lot further along than what originally meets the eye. Toyota invested $590M and Joby also acquired Uber's Elevate (their flying business line) while also receiving an additional round of funding ($75M from the company). And even with $0 in revenue so far, the growth trajectory for Joby looks extremely strong over the next decade. This is largely due to the TAM (a fancy way of saying market size) of the market as well as their place in it. Let's double-click into those two points.
What the Joby eVTOL looks like
eVTOL TAM & Joby Upside:
- We're projecting for the eVTOL market size to be huge. This may be hard to believe but based on the data we've seen so far, experts and us are calling for it to be over an $800B market by 2035 and multi-trillions the decade after. We realize this seems like a long way away and highly unlikely, but it only feels that way because it is so new. Many companies like Joby are well into the FAA approval process and once it becomes approved, these things are going to be launching fast. The infrastructure already exists and it will finally bring down the cost of "luxurious transportation". We see eVTOL's finally making a new form of transportation possible, that could have never existed given the high price point of helicopters. So with that context, the next point we want to address is, Why Joby vs. all the other eVTOL companies?"
- We love Joby because they have first mover advantage and they've completed over 1,000 test flights to date. If you want to play this theme, then Joby is by far the most advance relative to their peers. They successfully launched the first eVTOL in 2017 and most of their test flights have all been done remotely. But by far the most important thing they have going for them relative to the rest, is the their progress with the FAA. Let us make this clear: The FAA approval process while either be the tailwinds or death of this company. And from what we've uncovered, we believe they're well on their way there.
Joby is expecting to receive their FAA approval in 2023 and start launching commercial flights shortly thereafter.
If this timeline sticks, then we could be looking at massive stock growth come 18 months from now. But the reason we're recommending it now, is because this is still early on. Once they get deeper and deeper into the process, and it becomes more likely, investors will catch on and Joby will start to rise in value. Right now is a perfect time to grab ahold as the hype train as yet to take off yet.
What the Joby interior will look like
Outlook & Investing Strategy:
Right now we're completely ignoring Joby's estimates because the only thing that matters is their FAA approval. While Joby believes they can capture over 15% of the helicopter industry (11k helicopters in service in the US) in the next decade, it won't matter unless they get approved. Joby also believes they can hit $20B in revenue by then, but as we mentioned projections are meaningless until the FAA announces their decision. Their battery tech is something to also be monitored over the long term but again we're ignoring this for now. We realize we sound like a broken record but our entire thesis rests on the fact that we believe the eVTOL market will be huge and that Joby will be one of the first to enter it and take market share.
Therefore this pick obviously comes with significant risk and a long term mindset. As more and more progress gets announced with the FAA, it will affect the stock price in either direction, but we likely won't have clarity for another year. Therefore this stock is a long term hold and can double if the company continues to make traction. We're truly excited for their growth and think they can become a massive player in this space. Their vertically integrated business should make others envious and they are taking a page right out of Tesla's playbook. In the aviation space, Joby is disrupting the industry like no one else. We'll continue to monitor this company and keep you all posted on any updates!
Rating: Overweight
Risk: Very High
Ticker: JOBY
Market Cap: $5.6B