Joby Aviation is the largest electric vertical takeoff and landing (eVTOL), by market capitalization, but its stock price remains well below its previous high. The stock has fallen by more than 20% in the past year, and over 70% since its high.
A balance sheet that is not only good but also losses-making
Joby Aviation spends millions on building their flying cars, just like Lilium, Archer Aviation and other companies.
In 2023, the company will have a net annual loss of over $513,000,000. This is a huge increase from $258,000,000 it had made just a year before. It is easy to understand that the company has not generated any revenues yet. It has collected $2 billion over the years from investors such as Toyota and Uber.
Joby Aviation continues to make substantial losses and will do so for the foreseeable. The company’s second-quarter net loss was over $123m, while its cash usage dropped to $99m.
Joby Aviation, on the other hand, has one of best balance sheets within the aviation industry. It ended the third quarter with more than $825 millions in short-term and cash investments. This balance sheet can be a positive thing for a company that is losing money because it generates a lot of interest. It made $11 million from interest and other sources of income in the past quarter.
However, the Federal Reserve’s path is to reduce interest rates. This will result in a reduction of the amount it earns by keeping cash.
The company also applied for a Department of Energy loan that could allow it to continue operations without having to raise cash. Joe Biden’s DoE has provided loans to several businesses, including Qcells (1.45 billion dollars) and PlugPower ($1.6 billion).
Joby Aviation is developing technology to reduce carbon emissions, so the US could benefit from the loan. The Federal Aviation Administration recently granted $1 million to the company.
A strong balance sheet helped Joby Aviation avoid painful dilutions that other eVTOL investors have experienced. The number of outstanding shares has increased from 604.33 to 713 millions. Archer Aviation shares, on the other hand, have increased from over 157 to 298 millions.
Joby Aviation may still need cash in the future, even without DoE’s loan. This could be either 2025 or 2026.
The commercialization process is in progress
Joby Aviation’s stock price also declined despite the fact that the company continued to invest heavily in R&D. The company is also working on its hydrogen-powered aircraft with a 561 mile range.
The FAA has been working for a while now and is at 37% in its fourth phase. The company has applied for certifications in Australia, Dubai and other countries.
The company signed an MoU, which is a contract with Mukamalah. This company belongs to Saudi Aramco. Mukamalah is a major buyer of Joby Aviation’s aircraft. This is significant because Mukamalah is the largest operator in the world of corporate aircraft.
If all goes according to plan, Joby Aviation expects its aircraft to be fully commercialized in 2025-2026.
The company still faces significant risks. As we’ve seen with the EV industry, it can take years for companies to turn a profit. This means Joby will also continue to burn cash for some time, potentially leading to dilution.
The second issue is competition, as the eVTOL market matures. Volocopter will face competition from Lilium, Archer Aviation and Vertical Aerospace, as well as other notable companies.
As we’ve seen with the EV sector, this competition is likely to affect margins. The industry is characterized by high entry barriers, mainly because the certification process takes so long. McKinsey predicts that if this industry is to thrive, there will only be five major companies.
It is not clear whether the hydrogen-powered aircraft Nikola will succeed, just as it has struggled with its truck.
Joby Aviation Stock Price Analysis
On the weekly chart, the other thing to keep in mind is the head-and-shoulders pattern. This pattern usually leads to an explosive bearish breakout. The stock of the company was at its neckline.
It has also remained under the 50-week Exponential moving average (EMA). The chart has formed a bearish flag pattern. The stock is therefore likely to have a negative breakout within the next few weeks. This will cause it to drop below the psychological $4 level.
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