I have long been upbeat on the eVTOL (electric vertical take-off and landing) sector because eVTOLS, also known as flying cars, are much cheaper than helicopters to operate but are very similar to helicopters from an operational standpoint. Specifically, like helicopters, eVTOLs land vertically, enabling them to transport people to many points within cities. This has led to the rise of undervalued flying car stocks.
The latter characteristic, in turn, will allow them to fly consumers around cities while circumventing traffic jams on the ground. A new report somewhat validates my bullishness on eVTOLs, as analysts predict that the sector will expand at a very rapid compound annual growth rate of 52% over the next seven years and generate $23.4 billion in sales in 2030.
Here are the three most undervalued flying car stocks that will enable investors to exploit the sector’s rapid growth.
Joby Aviation (JOBY)
Joby Aviation (NYSE:JOBY) appears to be one of the most advanced companies within the flying-car sector as it provided “all of its Certification Plans to the Federal Aviation Administration” in July In February, Joby completed its first major regulatory milestone, as “its Certification Basis (was) published in the Federal Register.” The company plans to begin offering flights to consumers in 2025.
Also last month, investment bank Canaccord Genuity raised its price target on JOBY stock to $11, well above the stock’s current price of $7.45, and kept a “buy” rating on the shares. The firm is bullish on the company partly due to its alliances with the Pentagon, Uber (NYSE:UBER), and Delta Air Lines (NYSE:DAL). Additionally, Canaccord called Joby “the best capitalized” of the flying car stocks.
If Joby can get a 20% share of the flying car market in 2027 and the sector is worth $15 billion by then, its revenue will come in at $3 billion. That means the stock could be trading at less than two times its 2027 sales, making its valuation rather attractive.
Archer Aviation (ACHR)
Archer Aviation (NYSE:ACHR) has made multiple, huge deals in recent months, making its current $1.85 billion market capitalization look quite low.
On July 31, the company unveiled new agreements with the U.S. Air Force that may ultimately be worth up to $142 million. And on Aug. 11, the eVTOL maker obtained investments with a total value of $215 million from several entities, including Stellantis (NYSE:STLA), the huge, Europe-based automaker, Boeing (NYSE:BA), United Airlines (NYSE:UAL), and Cathie Wood’s ARK Investment Management.
Moreover, in a development that could tremendously boost the value of ACHR stock over the long term, the eVTOL maker agreed to develop autonomous planes with Boeing.
Finally and impressively, Archer disclosed that the FAA had agreed to allow its Midnight aircraft ti begin test flights after it met all of the agency’s safety criteria.
Embraer (ERJ)
In a previous column, I noted that Embraer (NYSE:ERJ) “which produces many different types of aircraft and generated revenue of 4.5 billion Brazilian Real in 2022, equal to about $940 million, has launched an eVTOL subsidiary called Eve.”
Brazil-based Embraer will be able to provide Eve with a great deal of financial backing, and the subsidiary will be able to form alliances with and sell planes to Embraer’s customers, which include many major airlines.
Indeed, at the Paris Air Show in June, Eve signed letters of intent to deliver 50 aircraft to Norwegian carrier Widerøe and “up to 30 jets with Nordic Aviation Capital, an aircraft leasing company.”
Moreover, United Airlines (NYSE:UAL) has agreed to utilize EVE’s aircraft in the San Francisco area. Of course, the alliance can eventually be greatly expanded.
ERJ stock is changing hands at a very attractive forward price-earnings ratio of 16.4. The shares do not seem to be reflecting any of the huge value that Eve is likely to create over the long term.
On the date of publication, Larry Ramer did not hold (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.
