Joby Aviation (JOBY +1.97%) is an electrical vertical takeoff and landing (eVTOL) aircraft start-up that's been attracting a lot of attention from investors lately. However, there are two things every investor should know before buying in to this hot stock.
1. Joby Aviation investors will need patience
Joby's eVTOLs look like a cross between a helicopter and a small propeller plane, with six rotors that can face upward for lift or forward for thrust. And they aren't for sale ... yet.
Image source: Getty Images.
While the company has completed piloted test flights of its eVTOL air taxi, it's still working its way through the Federal Aviation Administration's (FAA) certification process. However, Joby is reportedly in the final stage of FAA testing, and could begin commercial operations next year.
That said, once it gets FAA approval, Joby will still have to scale up. That takes time, and the company is currently burning through $500 million in free cash flow each year. It'll take years before it can grow into its current $12 billion valuation. In the meantime, investors will need to be patient as Joby relies on a slew of corporate partners and possibly additional stock offerings to stay afloat.
Joby has a lot of big-name partners in its corner. It acquired Uber Technologies' exploratory eVTOL arm Elevate and the passenger business of Uber's Blade helicopter service. Uber also gave Joby a $75 million cash infusion early on. More recently, Joby announced a partnership with Nvidia (NVDA 0.49%), manufacturing support and an $894 million investment from Toyota, and is developing military eVTOLs with L3Harris. But keep in mind that none of these partnerships have come to commercial fruition either ... yet.
NYSE: JOBY
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2. Joby is really a long-term bet on autonomy
These names give Joby more than just street cred and much-needed cash. Uber and Nvidia are both companies that have a vested interest in seeing autonomous eVTOL-style vehicles take off. For Uber, autonomous eVTOLs can be used to supplement (or perhaps replace) its fleets of Uber Eats delivery drivers.
Eventually, Uber hopes to offer an autonomous taxi service, and eVTOLs could potentially play a role there as well (if the autonomous systems are advanced enough). That's where Nvidia comes in. The chipmaker has developed its IGX Thor platform to support physical artificial intelligence (AI) in industrial applications. In plain English, that means it's a platform supporting autonomous robots that use AI to process and navigate through the physical space around them. While plenty of Nvidia partners are developing manufacturing and healthcare operations on IGX Thor, Joby is the only partner for autonomous aviation. That's a huge win for Joby, because of Nvidia's near-monopoly-level advantage in the advanced AI semiconductor market.
In other words, while there's likely to be a lot of short-term volatility in Joby's stock, its current valuation is based on a (still very risky, still speculative) long-term vision for an autonomous future.
