Though special purpose acquisition companies have generated controversy over the trailing year for their spotty performances, these blank-check firms do serve a broader purpose. They deliver groundbreaking technology firms that might otherwise never hit the public markets. Case in point is Joby Aviation (NYSE:JOBY) stock.
Joby is an electric vertical takeoff and landing (eVTOL) manufacturer. Much hyped, JOBY stock is now trading under its own brand identity.
On the surface, it’s hard not to appreciate what Joby Aviation is bringing to the table. By introducing and expanding the concept of electric air mobility, the company addresses a key contributor to carbon emissions. According to the Environmental and Energy Study Institute, the use of jet fuel produces carbon dioxide at a fixed ratio of 3.16 kilograms of CO2 per 1 kilogram of fuel.
The above ratio is irrespective of the phase of flight, implying that fossil-fueled-based air transportation solutions are unnecessary inefficient. Indeed, the Environmental Protection Agency reports that aircraft contributes 12% to national transportation-based emissions and 3% of total greenhouse gas production. Cutting into this environmentally costly narrative will likely do wonders for JOBY stock.
And cutting emissions is exactly what the underlying company plans on doing. As I explained in a detailed analysis for Benzinga, Joby targets production of two eVTOL aircraft by the end of this year. “By the end of 2026, however, the company expects to command 963, a gargantuan production goal.”
Better yet, the demand profile for JOBY stock couldn’t be more robust. Cities are getting more crowded, which not only causes increased traffic problems but also violence. According to Apolitical.co, “68% of people will live in cities by 2050.” Having that many people crowded into tight quarters could easily cause problems.
Through superior mobility options, Joby might even help ease social tensions.
Inquiries Typical of SPACs Cloud JOBY Stock
Just as importantly as the air mobility firm’s production goals, it must align with an operational plan. Otherwise, JOBY stock would merely be tied to an entity with non-productive assets. In the aforementioned Benzinga article, I had this to say about its day-to-day business:
According to Wccftech.com, once Joby is fully operational, it will run each of its aircraft for 12 hours daily, with 7 of those hours in the air. In total, management anticipates that the company will lead 12.4 million flights annually, translating to approximately 35,000 flights each day with a load factor of 2.3 passengers per trip and an average trip length of 24 miles.
By December 2026, Joby’s management team projects revenue to reach $2 billion. Each aircraft costs about $1.3 million to make, so the business has the potential to prosper if consumer projections hold up.
But to be fair, that’s a big if.
Like so many other innovative SPACs, there are plenty of aspirations but not much meat. As you might suspect, JOBY stock is associated with a pre-revenue business. Management estimates that it will post its first consistent sales in 2024, then posting positive net income in 2026.
While the business has tremendous potential, eVTOL is a frontier market – and frontier markets feature plenty of regulatory unknowns. True, Joby has been working with the Federal Aviation Administration for many years, an advantage it carries over the competition. But when you’re dealing with carrying human passengers via an experimental platform, it’s never a comfortable situation.
Let’s also not forget that the competition is not going to let Joby have turbulence-free airtime. Boeing (NYSE:BA) and Lockheed Martin (NYSE:LMT), among several other companies have their eyes set on the potential eVTOL revolution.
Economic Necessity Might Lift Joby
Although it’s difficult to ascertain where JOBY stock might end up – flying higher with public market debuts that made good on their hype or into the SPAC trash can – I’ll leave you with this note. According to a study by the Centre for Economics and Business Research and INRIX, it estimates that “Americans over a 17-year period to 2030 will waste $2.8 trillion due to traffic congestion should gridlock trends persist.”
Therefore, economic necessity may provide the catalyst that those speculating on JOBY stock are seeking. But like any SPAC-based debut, you should approach shares with caution.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.