Stuck in the morning or late-afternoon commute, more than a few drivers have fantasized about making use of the vertical axis of motion. However, the use of helicopters is both financially and environmentally onerous, which is why Joby Aviation (JOBY) and the underlying electric vertical takeoff and landing (eVTOL) industry is so compelling. Over time, Joby could help democratize urban flights while minimizing the broader social impact.
Fundamentally, air taxis command significant potential. According to Allied Market Research, the sector globally could reach a valuation of $6.63 billion by 2030, representing a compound annual growth rate (CAGR) of 26.2% from 2021, when the sector hit a market size of $817.50 million. Even more compelling for JOBY stock, this projection could be a low-end estimate.
Based on data from Fortune Business Insights, the worldwide eVTOL market size hit $1.11 billion in 2020. Further, the segment could expand at a CAGR of 23.13% between 2021 through 2028. At the culmination of the forecast period, the industry could carry a valuation of $23.21 billion.
To be fair, JOBY stock hasn’t enjoyed the most convincing public market debut. While it did enjoy upward speculation following its initial public offering, the security at its low point registered only a few cents above $3. However, since the January opener this year, JOBY gained a blistering 162%. Further, substantive market enthusiasm could carry it higher, though prospective investors need to be aware of key risks.
JOBY Stock Spikes on FAA Nod
Though the midweek session in the equities space was muted, the muffled activity only helped to underscore the dramatic performance JOBY stock printed. Gaining more than 40% against the prior day’s close, the eVTOL specialist responded positively to the U.S. Federal Aviation Administration (FAA) granting an airworthiness certificate to the enterprise.
With the FAA certificate, Joby will now be able to begin the flight-testing process for its first production prototype aircraft, which is currently being built at its Marina pilot production line in California, per Barchart content partner The Motley Fool. Further, TMF contributor Dan Caplinger stated the following:
Joby also expects that it will become the first eVTOL aircraft in history to be delivered to a customer. That should happen in 2024, when Joby will move to Edwards Air Force Base and operate the aircraft as part of a contract it has with the U.S. Air Force.
Notably, shares of automotive giant Toyota (TM) gained nearly 2% on Wednesday, which represents the largest external shareholder of JOBY stock. Toyota also played a key role in providing investment capital to fund the development of the eVTOL aircraft, per Caplinger.
Unsurprisingly, options traders took great encouragement at the news. Following the June 28 close, JOBY stock represented a key highlight in Barchart’s screener for unusual stock options volume. Specifically, total volume hit 39,766 contracts against an open interest reading of 87,584. Further, the delta between the Wednesday session volume and the trailing one-month average metric came out to 741.07%.
Drilling down, call volume hit 27,546 contracts while put volume came out to 12,220. This pairing yielded a put/call volume ratio of 0.44, suggesting an optimistic tilt. Moreover, the put/call open interest ratio landed at 0.51, again implying positive sentiment.
To top it off, the Barchart Technical Opinion indicator rates JOBY stock a 100% buy. Further, the investment resource notes that JOBY ranks in the top 1% of all short-term signal directions. Nevertheless, you don’t want to jump in without acknowledging the risks.
Economies of Scale and the Remote Work Conundrum
Theoretically, JOBY stock should really hit its stride as the underlying enterprise meaningfully democratizes the air taxi concept. Per Axios, the estimated cost of a journey from JFK airport to downtown New York City in a standard taxi is around $63. However, by 2025, analysts project eVTOLs to make the same trip at $60. By 2030, this cost might drop to $55.
While compelling, plenty of things likely have to go right before the eVTOL industry can transition from ferrying packages to humans. Further, eVTOLs in 2030 may charge $475 for trips between New York City and Boston. A typical flight would cost about $110 but will take about four hours in total travel time (such as waiting in security lines). For eVTOLs, the total time could come in under 90 minutes.
Now, that’s a massive improvement. However, depending on broader economic conditions, eVTOLs could still end up being a privileged platform for the affluent rather than a mainstream mode of transport.
Also, if you’re betting on JOBY stock, your position may act as a hedge against investments that cater to the assumption of a permanent adoption of work-from-home privileges. In other words, if companies elect distributed workforces rather than signing up for commercial office leases, the necessity for quick urban travel would be diminished.
After all, why bother flying in when you can just use phone it in? Since business travel would probably represent the bulk of eVTOL usage, a diminished addressable market (because of remote work) would not help the economies of scale argument.
That’s not to say you shouldn’t buy JOBY stock. Rather, it’s just something to think about before pulling the trigger.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
