One of the leading companies in the electric vertical take-off and landing (eVTOL) vehicle space is Joby Aviation (JOBY 0.45%). Although it hasn't commenced commercial operations yet and still faces many questions about its future, investors have been bullish about its growth prospects. So far this year, the stock is up by close to 90%.
Joby's market cap is now around $14 billion, which effectively bakes in high expectations for the business' success. And next year could be a pivotal one in determining whether the company is indeed on the right track.
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Joby may commence commercial operations next year
The company has been making progress in its efforts to earn regulatory certification for its eVTOL aircraft, but it hasn't obtained a green light just yet. Once certified, its aircraft could operate as an air taxi, providing its passengers with a new way to dodge traffic congestion in major cities. That market presents a potentially massive opportunity for Joby and other eVTOL companies.
Management says its air taxi service is on track to launch in Dubai in 2026. If all goes well and operations commence, that'll be a monumental achievement that could trigger a further rally in its share price. Investors, however, must recognize that even under an ideal situation, it could be quite some time before eVTOLs become common in the skies.
An even bigger catalyst for the business could be obtaining Federal Aviation Administration (FAA) certification in the U.S. If that happens, the company may soon launch services in Los Angeles and New York City, two key markets it has been eyeing.
Investors should brace for volatility
While there is a lot of hype and excitement in the eVTOL space, there is also plenty of competition. Joby isn't the only company that's close to launching an air taxi. Rival Archer Aviation is a big name to watch out for as well, as is Beta Technologies, which recently went public and has the backing of Amazon and General Electric.
But given that its market cap is now more than those of Archer and Beta combined, investors are clearly betting on Joby to be the front-runner in the eVTOL industry. There has, however, been plenty of volatility amidst its rise. As of the close Tuesday, it was trading at $15.44 -- down 24% from its 52-week high of $20.95.
Investors will be eagerly awaiting signs of progress from Joby next year, but if it encounters any challenges along the way, the stock could easily decline further. For it to maintain its premium valuation in relation to other eVTOL stocks, Joby will need to prove that it's further ahead and a far safer buy than the competition. That may not be easy to do, and there could be plenty of volatility ahead for the stock given its high price.
NYSE: JOBY
Key Data Points
Is Joby Aviation a good stock to buy today?
Joby is a promising growth stock, but it comes with risks that investors shouldn't overlook. It has incurred operating losses totaling $663 million over the past 12 months, and it may be a long time before it turns a profit, assuming it ever does. At its still inflated valuation, I'd be wary of buying Joby stock today, even though it's down from its peak.
Analysts' consensus one-year price target for the stock is less than $14, suggesting that there may not be room for it to rise in the near term. While those analysts could increase their targets next year if Joby commences commercial operations, its current valuation already factors in a fair bit of bullish hopes. Given that there is seemingly no margin of safety here, I'd keep this stock on a watch list, as it may be too risky to buy right now.
