January was a tough month for a lot of speculative, unprofitable stocks, but Joby Aviation (JOBY 1.96%) fared worse than most. Shares of the air taxi developer fell more than 43% for the month, according to data provided by S&P Global Market Intelligence, as mounting competition and a tepid analyst report caused investors to head for the exits.
Joby is one of a number of companies developing electric airplanes capable of vertical takeoffs and landings, or eVTOLs. There is certainly a potential market for a vehicle that can overfly traffic jams and offer a green alternative for short flights, but also a lot of uncertainty as to when the market will develop.
Joby announced plans to go public via a special purpose acquisition company (SPAC) last February. In the months that followed, other eVTOL start-ups including Vertical Aerospace (EVTL 0.89%), Lilium (LILM 1.80%), and Archer Aviation (ACHR 3.55%) all followed, giving investors a lot of choices if they want to speculate on the future of air travel.
As investors soured on pre-revenue companies, shares of Joby were caught in the downdraft. There was also news that did little to inspire confidence. Barclays analyst David Zazula initiated coverage of Joby with an equal weight rating, saying the sector has potential upside but also "significant risk." Joby has a head start, according to Zazula, but also has a lot of expectations priced in.
The competition is only intensifying. In mid-January, Boeing (BA -1.16%) upped its investment in Wisk Aero, another eVTOL start-up. Boeing is the sort of deep-pocketed competition that could be tough for a start-up like Joby to deal with.
Investors know roughly as much about Joby's odds for success now as they did heading into the month. What changed in January was the willingness to give companies like Joby the benefit of the doubt.
As said above, there is a real, and potentially significant, market for eVTOLs, and Zazula is right to give Joby the nod as an early leader. The company has performed more than 1,000 test flights, has a solid balance sheet, and counts Toyota Motor and Uber Technologies among its backers.
But at best, it will be 2024 before these aircraft are viable commercially. Given the amount of competition, that's a long time to stand by and hope for the best.
In a month when investors were selling companies that are a way off from profitability, shares of Joby Aviation got hit hard.