Picture weaving through city skyscrapers in a quiet, emissions-free aircraft that takes off like a helicopter but flies with the efficiency of a plane. That's the goal of America's two leading electric vertical takeoff and landing (eVTOL) aircraft manufacturers, Joby Aviation (NYSE: JOBY) and Archer Aviation (NYSE: ACHR).
Since going public at the start of the decade through special purpose acquisition company (SPAC) mergers, shares of both companies have lost ground, reflecting the capital-intensive nature of developing a novel form of aviation.
That said, Joby and Archer have both staged a remarkable comeback, with shares of each air taxi pioneer rallying sharply over the past six months (see graph below). This surge in investor interest comes at a critical moment. Both companies are in the final stages of their certification processes and plan to launch commercial operations in the coming months.
While their shared goal remains to transform urban mobility, Joby and Archer are taking divergent paths. Archer recently expanded into defense applications through a partnership with Anduril Industries, while Joby has strengthened its alliance with manufacturing giant Toyota (NYSE: TM), leveraging the automaker's expertise in mass production and quality control.
While Archer has captured most investor attention early in the new year, Joby has equally ambitious plans for 2025. Here's a look at whether Joby's stock screens as a compelling buy as it prepares for takeoff.
Joby's eVTOL aircraft combines helicopter-like takeoff flexibility with fixed-wing aircraft speed and efficiency. The aircraft can carry four passengers and a pilot at speeds of up to 200 mph while operating far more quietly than traditional helicopters.
The aircraft's unique design makes it particularly suited for urban operations. Its low noise profile allows for operations in dense city environments where helicopter noise has historically faced strong opposition, while its 100-mile range covers over 99% of potential routes in major markets like New York City and Los Angeles.
In December 2024, Joby's path to commercialization reached a critical milestone with its first Type Inspection Authorization (TIA) testing, marking entry into the final phase of Federal Aviation Administration (FAA) certification. The company has completed three of five FAA certification stages and over 40% of the fourth stage, putting it ahead of most competitors in the certification process.
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The initial TIA testing focused on the aircraft's flight deck, with four FAA test pilots evaluating human factors and ergonomics in an FAA-conforming simulator. The next major step comes later this year when Joby plans to begin TIA flight testing using its first FAA-conforming aircraft, now under construction at its Marina, California, facility.
Joby's strategic alliance with Toyota deepened significantly in Q3 2024 when the auto giant committed an additional $500 million investment. This latest funding builds on a seven-year collaboration that has helped shape Joby's manufacturing approach.
The partnership leverages Toyota's renowned expertise in mass production and quality control, going well beyond a typical investment relationship. Toyota's manufacturing prowess could give Joby a crucial advantage in scaling production as the air taxi market develops, particularly given the complex nature of aircraft manufacturing.
Unlike traditional aircraft manufacturers, Joby plans to operate its air taxi service rather than primarily selling to third parties. This vertically integrated approach aims to capture more value by controlling the entire customer experience, from aircraft production to flight operations.
The company appears well funded to pursue this capital-intensive strategy. As of Q3 2024, Joby had $710 million in cash and short-term investments, further strengthened by a completed $222 million equity offering in October 2024 and Toyota's $500 million investment.
This robust balance sheet represents a crucial competitive advantage in the emerging eVTOL industry. While hundreds of companies are pursuing air taxi development, few can match Joby's financial resources and strategic backing, giving the company staying power in a capital-intensive race to commercialization.
The potential for eVTOL technology appears massive, with multiple research firms projecting a multitrillion-dollar market opportunity over the coming decades. Joby is well positioned to capture a significant share of this sizable commercial opportunity, leading competitors in the FAA certification progress while benefiting from Toyota's strategic partnership and manufacturing expertise.
Nonetheless, Joby's path to revenue generation is fraught with risk. Since its founding in 2009, the eVTOL pioneer has already accumulated $1.6 billion in losses, and it still faces the complex challenge of transitioning from aircraft development to a full-scale commercial air taxi service.
Moreover, commercial success isn't guaranteed, even after the rigorous and costly certification process. Speaking to this point, Joby and its eVTOL peers all face highly uncertain market adoption. Potential customers may prove hesitant to embrace this novel form of transportation, potentially leading to a slow revenue ramp.
The massive infrastructure build required to bring eVTOLs to daily life could also prove to be an important bottleneck for the industry as a whole. As a result, Joby may have to operate at a loss for an extended period while the world works toward a flying taxi future. However, Joby's early lead in certification, strategic partnerships, and strong balance sheet should allow it to outlast the industry's early growing pains.
Joby's stock offers investors a front-row seat to the emerging eVTOL revolution, backed by industry-leading certification progress and a deep-pocketed manufacturing partner. The company's strong balance sheet and vertically integrated business model provide meaningful competitive advantages in an industry where many competitors lack either the funding or expertise to reach commercialization.
That said, this mid-cap growth stock still represents a highly speculative investment, given the nascent state of the air taxi market and the maze of regulatory and commercial hurdles it must navigate in the years ahead. Turning to the specifics, the company must successfully execute its aircraft certification, build out critical infrastructure, and win consumer acceptance -- significant hurdles that could delay or derail its commercial ambitions.
What's the bottom line? At current levels, Joby stock is a compelling buy for investors with a high risk tolerance and long-term horizon. While the path to a functional eVTOL market will be turbulent, the company's leading position in certification, strong partnerships, and robust balance sheet make it one of the best-positioned players to succeed in this potentially massive new market.
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George Budwell has positions in Archer Aviation, Joby Aviation, and Toyota Motor. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Is Joby Aviation Stock a Buy? was originally published by The Motley Fool
