Joby Aviation (NASDAQ:USE) the stock has fallen 31% since exiting a SPAC deal with Reinvent Technology Partners on August 11. This makes sense because Joby is a “pre-income” company. Investors have nothing to judge JOBY shares except blueprints, sponsors and a prototype.
The company intends to deliver an electric helicopter, known as the Vertical Take-off and Landing (VTOL), in 2024. Sponsors include Reid Hoffman, who co-founded what is now that of Microsoft (NASDAQ:MSFT) LinkedIn, and Mark Pincus, who founded the games company Zynga (NASDAQ:ZNGA).
If Joby can deliver and this thing takes off, four people and a pilot can go 200 miles per hour for 150 miles on a single charge. But there are a few things Joby will have to overcome by then.
JOBY Stock needs FAA approval to be successful
The business plan is to provide air taxi service and sell environmental regulatory credits to airlines and other aviation companies. But until there’s a taxi with Federal Aviation Administration (FAA) clearance to operate, JOBY stock investors are buying hot air.
This is why Joby has been such a volatile stock. Like hot air, its value goes up and down with greed and fear of the market. Are you feeling greedy? JOBY share is $ 13 per share. You’re afraid ? That’s $ 8 stock, maybe less. It’s ridiculous. It’s a bubble.
The promise of tomorrow is worth more than the performance of today. Based on Joby’s price of $ 9 per share on October 8, the company is worth $ 5.5 billion. It is more than JetBlue (NASDAQ:JBLU), a true airline that made $ 3.4 billion in revenue last year.
To hear Joby’s CEO JoeBen Bevirt say it, however, air taxis are the next big thing. Senior executives will travel to Miami, board a Joby air taxi, and fly to Key West Beach half an hour later. Or, they could fly to New York and go to the Hamptons. Maybe a private jet will drop me off at LAX and Joby can take me to my brother’s in Huntington Beach.
What We Know About Joby’s Air Taxi Bet So Far
Joby’s demonstrator has engines on each wing and on the tail, and more above the cockpit. Its reservation system will be hosted in Uber Technologies’ (NYSE:UBER) carpooling application. Uber sold its air taxi ambitions to Joby and agreed to invest a potential total of $ 125 million in the business.
Air taxis between airports are nothing new. My dad bought me a ticket on one in 1965 from Newark to JFK. It was called a helicopter ride. I was 10 years old. (We weren’t rich. He was just extravagant.) It’s just that electric VTOLs are cooler and quieter, so more flexible – that’s what makes them so innovative.
There are analysts with hockey stick charts (they always show revenue growing in a form like this) claiming that the air taxi market will be a $ 6.6 billion business in 2030. The current industry is worth around $ 817 million.
Air taxis built around turbine or reciprocating engines will take less than a quarter of the market share in 2030. The big bucks of the future will be in hybrids or electric VTOLs like Joby.
The essentials on JOBY Stock
I may have it all wrong here. Joby could take off.
As our David Moadel wrote recently, Morgan Stanley believes Joby could be worth $ 60 a share someday. Their one-year price target is $ 16. Besides, Investor place Contributor Larry Ramer believes Joby could be a big winner, if government entities stepped aside.
Speaking of which, it’s government money that could be Joby’s big deal. Military contractors like Boeing (NYSE:BA), Airbus (OTCMKTS:EASY) and Dassault Systèmes (OTCMKTS:DASTY) of France are all turning to the air taxi sector.
Additionally, the White House has requested a 2022 defense budget of over $ 750 billion. Some of these funds could be devoted to the development of VTOLs.
With such a large field of competition and little to show for its product so far, I am skeptical of JOBY stock.
As of the publication date, Dana Blankenhorn is long on MSFT. The opinions expressed in this article are those of the author, submitted to InvestorPlace.com Publication guidelines.
Dana blankenhornhas been a financial journalist since 1978. His latest book isThe Big Bang of Technology: Yesterday, Today and Tomorrow with Moore’s Law, technology essays available on the Amazon Kindle store. Follow him on Twitter at@danablankenhorn.