Flying taxis were once consideredscience fiction, but now they are much more than a fantasy. Many companies are rapidly innovating in the sector and aim to go live with a number of EVTOLs, or electric vertical takeoff and landing, vehicles as early as 2025. These vehicles aim to solve problems such as slow transport and dealing with traffic congestion. According to one study by Texas A&M, commuters spend an average of 54 hours per year stuck in traffic, showing the high portential for success in this space.
In this discussion, I will break down a company which I believe is the leader in this industry following its latest quarterly earnings. Let's dive in.
The Uber of the sky
Joby Aviation Inc. (JOBY, Financial) is known to have created the so-called “Uber of the sky.” In 2020, the company went public via a SPAC merger with RTP, which was sponsored by the co-founder of LinkedIn Reid Hoffman. The company also acquired Uber (UBER, Financial) Elevate in the same year and received a $75 million investment. This gives it a huge advantage as users will be able to book a flying taxi just as easily as a car. Customers will make a booking then head to a “vertiport,” which usually consists of a rooftop landing pad.
Joby's EVTOL vehicle
Its vehicle consists of a six-rotor setup, which can accommodate one pilot and up to four passengers. The vehicle can travel up to a maximum speed of 200 miles per hour, which is faster than an average non-military helicopter, which has a top speed of 160 miles per hour.
Joby can land its vehicles in the heart of a congested city such as New York. According to the company, it would take just seven minutes to fly from downtown New York to JFK Airport, as opposed to close to 50 minutes in a traditional taxi.
Investments and partnerships
In October 2022, Joby received $60 million from Delta Airlines (DAL, Financial). The company also has further investments planned of up to $200 million, which will be released as the business surpasses certain milestones. The goal is to enable a customer to book an airport transfer directly via the Delta Airlines app, cutting out inner city traffic in major cities.
In July of 2023, Toyota’s (TM, Financial) North America CEO Tetsuo Ogawa joined the board of Joby Aviation. This followed the $400 million investment made by the world's largest car manufacturer. Toyota is also known to have pioneered “lean manufacturing” at scale and thus, should be vital in helping to scale the production of these vehicles. For example, the automaker has already been providing support on the design of “specific tools and processes,” according to the second-quarter earnings call.
Share price action
Joby Aviation saw its share price spiral down by around 70% between February 2021 and January 2022. This was mostly driven by the rising interest rate environment, which compressed the valuation of many growth stocks. However, between April and June 2023, its stock price exploded upward by over 150% on the back of new certification. Since July, it has corrected downwards slightly as some investors took profits at the top, but the share price still remains elevated.
Contracts
Joby Aviation is pre-revenue right now, but has a huge amount of opportunities in the pipeline. For example, the company scored a $131 million contract with the U.S Air Force, which plans to take aircraft in 2024. The application will be mainly logistics, but these could open up a huge number of military sales.
The business also rolled out its first full production prototype, which has been tested at the Edwards Air Force base. The key with this prototype is it is a full-scale aircraft made from a repeatable and scalable production line process.
Certification progress
The company has submitted all of its certification plans to the Federal Aviation Administration, two-thirds of which have been already accepted. This includes hardware and software plans for every component on board, including system safety documentation.
In late June, the company received a Special Airworthiness Certificate from the FAA. This enables flight testing without passengers to be done. The day after this approval, South Korean technology giant SK Telecom (SKM, Financial) invested $100 million into the company. This is a major deal as it could open up many opportunities in South Korea, a technologically advanced market.
Financial performance
Given Joby is still pre-revenue, it is no surprise the company is racking up heavy losses. For the second quarter, the business reported a net loss of $286 million and an operating loss of $116 million. This was partially offset by net interest income of $11 million.
The company also reported an adjusted Ebitda loss of $83.3 million, which was $9.2 million higher than in the prior-year quarter. This was driven by greater headcount and certification costs. Surprisingly, the business has 1,500 employees and, therefore, it is fully ramping up as a business.
Strong balance sheet
On a more positive note, the company has a strong balance sheet with $1.2 billion in cash and marketable securities. This includes a $80 million investment from Baillie Gifford (Trades, Portfolio) in May and the aforementioned $100 million received from SK Telecom.
Valuation
Valuing Joby Aviation is fairly challenging given it has yet to generate revenue. However, at the time of writing, it is trading at a market capitalization of $4.8 billion, which is around 4 times its cash position. From a share price perspective, it is still 53% cheaper than its $15 per share high reported in February 2021.
Final thoughts
The flying taxi business is a true “moonshot” industry. There are a few companies in this space, but I believe Joby Aviation has a number of advantages. Its partnerships with Uber and Delta ensure sales are likely, while its investment from Toyota helps to ensure it can build its product at mass scale. The only risk with the business is if there is a public crash in 2024 that could destroy the stock price. Ironically, helicopters have many crashes regularly, but given this is a new industry, it will be watched closely.
