The risk with a lot of future-tech stocks is they are all story and no substance. In Texas, you might say they are all hat, no cattle. That’s not Joby Aviation (NYSE:JOBY).
It’s a speculative stock to be sure and has a story to tell but there is substance to what it’s building.
A leader in the rising class of electric vertical takeoff and landing aircraft, Joby is poised to become a real-world, commercial robotaxi company.
It’s building prototypes, delivering them to partners for testing, building factories to produce vehicles, and working towards the certifications needed to fly. So there’s a lot of potential, but also substantial risk.
We’ve seen similar stories flameout in the electric vehicle industry. Lordstown Motors, Mullen Automotive (NASDAQ:MULN), and Nikola (NASDAQ:NKLA) all promised to upend their industries. The only thing they lit on fire was investor cash.
So investor caution is warranted. But from all existing information, Joby Aviation stock looks ready to take flight.
So let’s see whether it is worthy of your investment dollars.
Taxiing for takeoff
Even if Joby had a hangar full of robotaxis ready for liftoff today, its stock would remain grounded without Federal Aviation Administration certification. The regulatory body has a multi-phase process for earning your wings, including proving airworthiness, pilot training, safety, and more.
Joby Aviation was the first eVTOL aircraft developer to receive a signed, stage 4 G-1 certification, which covers specific FAA airworthiness and environmental standards required for full certification. It maintains it will be the first eVTOL manufacturer to earn full airworthiness certification.
It’s a good way along the path. Joby devised a five-stage plan to help investors follow its progress. It completed Stage 1, is almost all the way through Stage 2, and the FAA has accepted 84% of its Stage 3 plans. There is still a lot more to go. The real challenge, and what Joby is really focused on is Stage 4, Testing and Analysis, which it’s only just starting.
It delivered its first aircraft for initial service operations with the Defense Dept. as part of a $131 million contract to test electric air taxis. It says as far as it knows, it is also the first company to receive airworthiness approval for an eVTOL aircraft from the U.S. Air Force.
Joby remains confident it will begin commercial passenger operations in 2025. That will come as part of the manufacturing facility it will build in Ohio with the capacity to produce up to 500 aircraft. That’s not a large number, but you have to walk before you can run. Financial backer Toyota Motors (NYSE:TM) is advising Joby as it prepares to scale production.
A story worth listening to
Joby Aviation has a good story going. But that’s not enough to justify an investment. Its financials look OK on the surface. Of course, it has no revenue, but it managed to report a $1.5 million profit in the third quarter. However, that happened because of changes in the fair value of warrants and earn-out shares and an increase in interest income because of higher interest rates on invested funds.
So investors shouldn’t put any credence in Joby being in better financial shape. These were non-operational gains unrelated to the business. The realized gains can (and likely will) turn negative in the ensuing quarters.
Joby saw a 36% increase in research and development expenses and a 19% increase in selling, general, and administrative expenses. This is not unexpected as Joby marches forward on its path to be commercial robotaxi operator. And that’s key to remember.
Joby Aviation doesn’t plan on selling its eVTOL craft to third parties but use them itself to run an air taxi company. It wants to be the “Uber of the Sky.” A vertically integrated business carries its own set of risks. It’s as if Uber Technologies (NYSE:UBER) was also manufacturing its own rideshare cars. It’s a more complicated business model and involves greater expense. Joby may find picking a lane and sticking to it is the best option. Be a manufacturer or a robotaxi company, but not both.
Worth the risk?
The robotaxi stock seems as though it’s doing all the right things and moving in the right direction. Investors who want to tap into this future-tech company should feel confident doing so, as long as they understand it is only a “story stock” right now.
Just don’t get lulled by it. There are still many chapters to come. You shouldn’t be backing up the truck to invest in Joby Aviation stock.
On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
