Joby Aviation (NASDAQ:JOBY) stock is down 31% since emerging from a SPAC deal with Reinvent Technology Partners on Aug. 11. That makes sense, because Joby is a “pre-revenue” company. Investors have nothing to judge JOBY stock by except plans, sponsors and a prototype.
The company intends to deliver an electric helicopter, known as a vertical takeoff and landing (VTOL) craft, in 2024. Sponsors include Reid Hoffman, who co-founded what is now Microsoft’s (NASDAQ:MSFT) LinkedIn, and Mark Pincus, who founded the game company Zynga (NASDAQ:ZNGA).
If Joby can deliver and this thing takes off, four people and a pilot can fly 200 miles per hour for 150 miles on a single charge. But there are a few things Joby will need to overcome between now and then.
JOBY Stock Needs FAA Approval to Succeed
The business plan is to provide an air taxi service and sell environmental regulatory credits to airlines and other aviation businesses. But until there’s a taxi with authorization to operate from the Federal Aviation Administration (FAA), JOBY stock investors are buying hot air.
That’s why Joby has been a volatile stock. Like hot air, its value rises and falls with the market’s greed and fear. Feeling greedy? JOBY stock is $13 per share. Feeling fearful? It’s an $8 stock, maybe less. It’s ridiculous. It’s a bubble.
The promise of tomorrow is worth more than the performance of today. Based on Joby’s Oct. 8 price of $9 per share, the company is worth $5.5 billion. That’s more than JetBlue (NASDAQ:JBLU), a real airline that did $3.4 billion in business last year.
To hear Joby CEO JoeBen Bevirt tell it, however, air taxis are the next big thing. Top executives will fly into Miami, hop in a Joby air taxi and hit the beach at Key West a half-hour later. Or, they might fly into New York and go to the Hamptons. Maybe a private jet will drop me at LAX and Joby can take me to my brother’s house in Huntington Beach.
What We Know About Joby’s Air Taxi Bet So Far
Joby’s demonstrator has motors on each wing and on the tail, plus more over the passenger compartment. Its reservation system will be hosted in Uber Technologies’ (NYSE:UBER) rideshare app. Uber sold its air taxi ambitions to Joby and agreed to invest an eventual total of $125 million in the company.
Air taxis between airports aren’t new. My dad bought me a ticket on one back in 1965, from Newark to JFK. It was called a helicopter ride. I was 10. (We weren’t rich. He was just extravagant.) It’s just that electric VTOLs are cooler and quieter, thus more flexible — that’s what makes them seem so innovative.
There are analysts with hockey stick graphs (they always show revenue shooting up in a shape like this) claiming the air taxi market will be a $6.6 billion business in 2030. The present industry is worth about $817 million.
Air taxis built around turbine or reciprocating engines will take less than a quarter of the 2030 market share. The big bucks of the future will be in hybrids or electric VTOLs like Joby.
The Bottom Line on JOBY Stock
I might be all wrong here. Joby might take off.
As our David Moadel wrote recently, Morgan Stanley thinks Joby could be worth $60 per share one day. Their one-year price target is $16. Additionally, InvestorPlace contributor Larry Ramer thinks Joby could be a big winner, if government entities would just get out of the way.
Speaking of which, it’s government money that might be Joby’s big problem. Military contractors like Boeing (NYSE:BA), Airbus (OTCMKTS:EADSY) and Dassault Systemes (OTCMKTS:DASTY) of France are all eying the air taxi business.
Additionally, the White House has requested a 2022 defense budget of more than $750 billion. Some of those funds could go toward the development of VTOLs.
With such a large field of competition and little to show for its product so far, color me skeptical when it comes to JOBY stock.
On the date of publication, Dana Blankenhorn held a long position in MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial journalist since 1978. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Follow him on Twitter at @danablankenhorn.