At its core, Joby Aviation, Inc. (NYSE:JOBY) is a company that wants to disrupt the urban air mobility industry. JOBY stock went public in August, and is an investment opportunity that is classified as very promising, challenging and too risky now.
Overall, I believe the company has a great product and business idea, but it’s too early to get excited about. So, the prudent decision is to put JOBY stock in the list of stocks to just monitor for now. Meanwhile, the high-risk decision is to buy shares of Joby Aviation now with the expectation that it is too early, and the business prospects seem great. But this is not a fact, it is just a thought and it lacks credibility.
So, what should you know now about Joby Aviation?
Well, before we get into things, one quick piece of advice. Investing in early pioneers in any industry should always be fine with your investment philosophy and level of risk tolerance. That said, JOBY stock is now full of promise and empty of revenue. So weigh the pros and cons of investing in it with utmost due diligence. Now, let’s take a closer look at Joby Aviation.
What is Joby Aviation?
The official website of Joby Aviation states the following:
“Joby Aviation is a California headquartered transportation company developing an all-electric vertical takeoff and landing aircraft which it intends to operate as a fast, quiet, and affordable air taxi service beginning in 2024. The zero emissions aircraft, which is quiet at takeoff and near silent when flying overhead, can transport four passengers and a pilot up to 150 miles on a single charge and can cruise at 200 mph. It is designed to help reduce urban congestion and accelerate the shift to sustainable modes of transit. Founded in 2009, Joby employs more than 800 people, with offices in Santa Cruz, San Carlos, and Marina, California, as well as Washington D.C. and Munich, Germany.”
Then, there is a video that shows this electric aerial ridesharing business idea and opportunity. Sure, I love the business idea. But sorry, it is too early to love the stock.
Still, I see plenty of factors that classify JOBY stock as an interesting investment to monitor, and not just rush in and buy it. As I have mentioned in some of my previous articles, a great company does not necessarily have a great stock. And for JOBY stock, I consider that what Warren Buffett said is a perfect example of what this transportation company represents today. The idea is not to focus on short-term swings in price, but rather focus on the underlying value of your investment opportunity.
Right now, shares of Joby Aviation trade at $9.43 per share. On the other hand, on Aug. 11, early enthusiasm sent the stock price at a high of $14.33. However, investors who rushed to invest in this newly public traded company and bought JOBY stock near $14 now see their investment down almost 30%.
Sure, not a good financial outcome. However, why do I believe that Joby Aviation is an interesting — and possibly disruptive — company? Well, there’s a few reasons.
The Urban Air Mobility Industry Is Growing
As a whole, a report by MarketsandMarkets about the Urban Air Mobility Market and its global forecast to 2030 mentions there is a notable growth expected between 2020-2030 in this nascent industry:
“The urban air mobility market is projected to grow from USD 2.6 billion in 2020 to USD 9.1 billion by 2030, at a CAGR of 13.5% from 2020 to 2030. Recent technological developments, use of UAVs in various civil & commercial applications, and significant investments in emerging economies drive the urban air mobility market. Various players such as Wisk (US), Lilium (Germany), Ehang (China.), Volocopter (Germany), and Airbus A Cubed (US), among others, are the key players operating in the urban air mobility market.”
In every industry, there are key drivers, restraints and challenges; But there are also opportunities. And for the Urban Air Mobility market, the key driver is the increasing demand to find alternative modes of transportation in urban areas. The adoption, though, is now limited due to a number of political, technological and legal factors. So, for Joby Aviation, the product seems to be a great one. But it will not be without stiff competition.
An Ambitious Business Plan
In Joby Aviation’s corporate deck from last month, the firm showed its belief that there is a massive untapped market opportunity of more than $500 million in Los Angeles alone. With plans to launch its app-based aerial ridesharing service directly to end-users in 2024, the company does not expect any significant revenue until then. So, for the next three years, news on topics like development and verification from the Federal Aviation Agency (FAA) are factors that can move JOBY stock.
Additionally, I want to see more details in the next few quarters of the estimates for Revenue per Available Seat Mile at $1.73 and Cost per Available Seat Mile at 86 cents. Also, Joby Aviation already has significant partnerships that are working towards the acceleration of its market launch in 2024.
Wait and See on JOBY Stock
With third-quarter earnings results set to be reported after market close on Nov. 11, what can we expect now from Joby Aviation? Maybe guidance on the actual development plans, or an announcement of a new strategic partnership?
With zero revenue and a lot of potential, logic says that JOBY stock is a highly speculative play now. To be frank, I love driving but hate any traffic jams. So, in this context, I am sure many other drivers will agree with me that what Joby Aviation is trying to accomplish is worth a lot of attention. That said, wait and see on JOBY stock — for now.
From a fundamental perspective, there is no solid argument to rush in and invest in now. Thus, plenty of risks exist for an aviation company that I would like to succeed and make a difference in our urban mobility.
On the date of publication, Stavros Georgiadis, CFA 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.
Stavros Georgiadis is a CFA charter holder, an Equity Research Analyst, and an Economist. He focuses on U.S. stocks and has his own stock market blog at thestockmarketontheinternet.com/. He has written in the past various articles for other publications and can be reached on Twitter and on LinkedIn.