Joby Aviation (NYSE:JOBY) rose as much as 15% in pre-market trading today after reaching a deal with Delta Air Lines (NYSE:DAL) to help get people home from airports.
Joby is developing an electric vertical take off and landing (VTOL) aircraft, something like a 21st century helicopter. The five-year deal will first target New York and Los Angeles, getting wealthy fliers to their homes in a few minutes rather than several hours. Joby stock opened at about $4.40 per share, a market cap of $2.3 billion.
This is the third VTOL deal between airlines and start-ups. American Airlines (NASDAQ:AAL) and United Airlines (NASDAQ:UAL) have also invested in the space. But the Delta deal, which could be worth as much as $200 million, is the largest signed so far.
Funding Joby
The deals are vital because Joby, like its competitors, is a “pre-revenue” company. Investors no longer like buying promises when real companies with earnings are on sale.
The deal is especially important to Joby, which was recently hit by a short-seller report from Bleecker Street Capital saying it can’t meet its projections. CEO Joeben Bevirt seemed to confirm the short report while announcing the Delta deal, saying his company can’t commit to producing revenue in 2024.
Joby came public last year after merging with Reinvent Technology Partners, a special purpose acquisition company run by Reid Hoffman and Marc Pincus, who founded Microsoft’s (NASDAQ:MSFT) LinkedIn and Take-Two Interactive’s (NASDAQ:TTWO) Zynga, respectively. Joby stock traded at $10.62 on its first day of trading and has since lost over half its value.
Analysts are mixed in their view. Bulls point to Joby’s $1.2 billion in cash as of June. Bears question the business proposition. InvestorPlace contributor Muslim Farooque recently profiled Joby as a good long-term stock, predicting flying taxis will become a reality with Joby at the center of it.
What Happens Next for JOBY Stock?
The key to the JOBY stock story is that it’s a long-term play. Its cash on hand and ready customer in Delta mean it has a chance to wait out the current economy and fly when conditions improve.
Once it does deliver product, however, it must make the numbers work. That is always the challenge with start-ups.
On the date of publication, Dana Blankenhorn held a long position in MSFT stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
