What happened
Shares of London-based zero-emission electric airplanes start-up Vertical Aerospace (EVTL -6.24%) sure did live up to their name on Tuesday, soaring 42.1% through 2 p.m. ET.
I think you can thank Deutsche Bank for that.
Image source: Getty Images.
So what
In a trio of new stock initiations yesterday, TheFly.com reports that Deutsche Bank began covering Joby Aviation, Archer Aviation, and Vertical Aerospace. But here's the weird thing: Out of these three electric airplane stocks, Archer Aviation is actually the only one that Deutsche Bank liked enough to assign it a buy rating (with a $10 price target). Both Joby and Vertical Aerospace, on the other hand, received lukewarm hold ratings and price targets of $8 and $9, respectively.
Nevertheless, Vertical Aerospace investors seem overjoyed just to have a big megabank like Deutsche paying them some attention -- and how Deutsche described the potential evolution of the air taxi industry didn't hurt. As the bank argued, electric cars evolved from "a niche market to [become today] the foundation of every automaker's future relevance." It's not certain -- but at least possible -- that this is the way that electric airplanes will evolve as well.
Now what
There is one big hurdle that these companies still need to overcome, however, if their stocks are to reward investors as Deutsche hopes they will: profits.
As in, these companies all need to figure out a way to earn some. According to data from S&P Global Market Intelligence, none of Joby, Archer, or Vertical is anywhere near operating profitably at present. Last year, Archer lost nearly $350 million as it attempted to build an electric airplane business. Joby lost $180 million.
I suppose then that the good news for Vertical Aerospace is that it lost "only" $38 million -- but even so, this company is a long way away from being a profitable business, and until it ramps up revenue past the less than $150,000 it collected last year, its chances of becoming self-sustaining anytime soon are vanishingly slim.
Far from an indicator that the stock is about to fly even higher, I'd be taking advantage of today's surge in stock price as an opportunity to cash out before this company finds a way to lose even more money.
