Joby Aviation (JOBY -0.50%) is an aerospace company with an intriguing idea. It wants to fly people over traffic in relatively quiet electric aircraft. Known as electric vertical takeoff and landing (eVTOL) craft, these could essentially function as an Uber Technologies in the sky, offering services to passengers who are sick of congested roads (and aren't afraid of flying).
In the past, eVTOLs seemed more at home in the realm of science fiction -- believable in a novel, but scarcely compatible with the infrastructure of the real world. Over the last five years, however, and especially the last eight months, a world with eVTOLs flying above cities is seeming more like a true possibility.
Governments and airlines are backing eVTOLs with policy and investments, and designs for their infrastructure are starting to take shape. For a pre-revenue company like Joby Aviation, that support has largely been the reason its market valuation has shot up to about $12 billion at the time of writing.
All in all, Joby seems at the cusp of something exciting within transportation. Here are three reasons why investors might want to buy its stock like there's no tomorrow.
1. It's ahead of rivals in the FAA certification process
Certification from the Federal Aviation Administration (FAA) is the make-or-break hurdle for eVTOL companies. Right now, Joby is separating itself from the pack. For context, the certification process involves five stages. As of Aug. 4, the company was 70% complete with its side of the fourth stage, with the FAA over 50% complete with its side.
Joby is currently preparing an FAA-conforming aircraft for testing purposes, the assembly of which will put it into the final certification stage. The company now expects FAA pilots to start testing aircraft with flights as early as next year.
Meanwhile, the last we heard from Archer Aviation, another eVTOL start-up and Joby's rival, it was "focused on the fourth and final phase of the certification program" and had "received FAA approval for [about] 15% of the compliance verification documents." That was taken from its first-quarter shareholder letter, which was echoed almost verbatim in its second-quarter earnings call three months later.
Joby eVTOL. Image source: Joby Aviation.
That said, the White House's new eVTOL Integration Pilot Program (eIPP) could see both companies accelerating through the final parts of this process. Although it's unclear how this will affect Joby's timeline for FAA Type Certification, the sense of urgency in Washington is a good sign that things could pick up.
2. Friends in all the right places
As I said above, Joby is a pre-revenue company. That said, the company is not just twiddling its thumbs, waiting for FAA approval. It's making some big moves and getting investments from blue chips in the industrials sector.
Let's start with the moves. At the beginning of August, Joby formed a collaboration with defense contractor L3Harris Technologies to develop a hybrid variant of its eVTOL (gas turbine) for defense purposes. This could open up a new revenue stream for Joby, one that could potentially generate income before its commercial eVTOLs take flight.
At the end of the same month, Joby completed its acquisition of Blade Air Mobility. This was a strategic move aimed at unlocking infrastructure in key urban markets like New York City for when its eVTOLs are certified.
At the beginning of the summer, Joby signed a memorandum of understanding (MoE) exploring a distribution agreement with Saudi Arabian-owned family business Abdul Latif Jameel for the potential delivery of up to 200 Joby aircraft valued at about $1 billion.
Then there's Toyota Motor, which plans to invest $500 million in Joby ($250 million has already been delivered), and Delta Airlines, which has invested in Joby in the past and plans to integrate its air taxis into its network in the future.
3. A strong balance sheet
Finally, it's worth pointing out that Joby had about $991 million in cash and short-term investments on its balance sheet at the end of June. If we add in the other $250 million from Toyota, that gives it $1.24 billion. Since its annual cash burn has been, on average, about $500 million, that should give it two years to operate before it needs a fresh cash injection.
Is Joby a buy?
There's a moment in every bold technology's journey when application stops being hypothetical and starts becoming real. I think Joby is getting very, very close to that moment. Although impediments to progress are also real -- and we shouldn't overlook the fact that Joby is pre-revenue -- momentum is swinging in the company's favor.
For investors who believe eVTOLs have the potential to open a new market, now is the time to buy its stock before tomorrow arrives with taxis in the sky.
