Will JOBY Stock Go Up?

Shares of Joby Aviation (NYSE:JOBY) have taken off in 2023, more than doubling over the course of the last six months. Following this momentum, will JOBY stock go up more? Let’s get a bird’s eye view of this company.

Joby Aviation is an early-stage company involved in developing small electrical aircraft for short-distance passenger flights.

The Joby aircraft is a 6-engine, all-electric vehicle capable of accommodating four passengers and one pilot.

The company’s business model involves partnering with companies such as Uber to create a passenger aviation network.

Joby’s aircraft is capable of taking off and landing vertically, making it a good fit for transportation in urban areas. The vehicle can also achieve speeds of up to 200 miles per hour and travel 150 miles per charge.

$0 Revenue Reported By Joby

Joby has not generated any reported revenue, so far. The one concrete transaction the company has in place is a $55 million contract with the US Department of Defense to operate nine of its aircraft at various military bases. The first two of these vehicles are expected to be operational sometime next year.

Although Joby’s growth is a distant vision at this point, the company has high hopes. By bringing aviation down to the scale of small passenger groups, the company hopes to eventually become the world’s most-used airline. Although its initial goal was to have ridesharing aircraft in commercial operation by 2024, it seems likely that significant deployment of Joby’s aircraft will take at least a couple of extra years.

One bright spot in Joby’s growth story is its list of strategic partnerships. One of the most critical of these is with Toyota Motors, which has invested around $400 million in the company.

In addition to its role as a leading investor, Toyota is also a major parts supplier for Joby Aviation. Toyota’s ability to manufacture parts at scale may be critical to Joby reaching its long-term goals.

Will Joby Stock Go Up?

Following the more than 150 percent spike in share prices this year, Joby Aviation has slightly exceeded the average analyst expectation.

The stock’s median target price based on 6 analyst forecasts is $8, about 7 percent below its most recent price of $8.71.

Investors should note, however, that analysts project the stock to trade anywhere from $6 to $11 over the next 12 months.

Despite being more or less in line with analyst price targets, Joby shows signs of overvaluation. At about 5 times its book value, JOBY trades well above the assets held by the company. Absent impending earnings and revenue, this is the only reasonable metric by which to value the stock.

Valuation Is A Deterrent To New Investors

While the stock likely would have trended up this year anyway on strong investor sentiment around electric vehicles, Joby also appears to have gotten a significant boost from short-covering activity. The company’s fundamentals have not improved appreciably this year, calling into question how much of the stock’s run can be justified by probable future cash flows.

Joby Aviation is also an almost entirely speculative stock, as it has no current sales. While this doesn’t eliminate its investment potential, it makes it extremely difficult for investors to ascertain its true value.

Moreover, Joby has only recently received approval to begin commercial operation of its aircraft. Given the complexities of air traffic regulation and the need to create an entirely new business model around aerial ridesharing, it could still be quite some time before Joby generates any appreciable revenue.

While Joby Aviation has a strong cash reserve of about $978 million, its losses over the past 12 months have added up to around $258 million. Without significant inflows of revenue, the company could find itself needing to borrow money or dilute its stock in order to raise the money needed for large-scale aircraft production.

Finally, Joby has not yet released any information about its pricing model that investors can use to compare its consumer appeal to current ridesharing companies. While the company claims its airfare rates will be affordable, more concrete details will be needed to evaluate Joby’s potential competitive position.

Will JOBY Continue to Rise?

Although Joby Aviation is developing fascinating technology that could become the new wave of passenger transport, the company is too far from commercial deployment for investors to make informed decisions about its future. Until the company can generate revenues and post information about its gross and net profit margins, investing in the stock remains quite risky.

Adding to this problem is the fact that Joby Aviation appears to be spiking for reasons largely unrelated to its fundamentals.

Stocks tied to the EV industry have risen steadily this year, driven largely by better-than-expected deliveries from EV manufacturers.

After getting caught up in this trend, Joby Aviation saw additional price surges as short-sellers attempted to cover their positions. While the approval for commercial testing is encouraging for the company, Joby’s fundamentals have not improved enough this year to justify its current price.

Taking all of this into consideration, it seems likely that Joby will correct downward at some point. With a valuation exceeding $5 billion and only $55 million in secured contracts, the company appears significantly overvalued.

Even though the EV industry is booming at the moment, an eventual slowdown in the sector or a wane in investor enthusiasm could saddle speculative stocks like Joby with large losses.

Investors interested in EV aircraft may want to watch Joby, as it could have a long runway for growth if and when it begins making sales. The potential for the company’s technology is large, but it will likely be better to wait until Joby establishes a firm commercial presence to consider investing.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.