Electronic vertical take-off and landing (E-VTOL) aircraft have recently made headlines with the announcement from Joby Aviation (JOBY) about their plans to build a production facility in Dayton, Ohio. This move signifies that the concept of “flying cars,” which has long been a staple of science fiction, could be becoming a reality. But as an investor, is now the right time to invest in this futuristic industry, and if so, is JOBY the best choice?
The idea of small, electric-powered aircraft that can take off and land almost anywhere without the need for runways is intriguing. It could revolutionize transportation for medium-sized journeys and benefit logistics companies involved in package delivery. However, it’s important to consider whether the end product or service will be affordable enough to create sufficient demand and whether the company itself is well-managed enough to build the necessary infrastructure over the long term.
While the pricing aspect of this equation is still uncertain, JOBY seems to have covered the management part. Although they are still pre-revenue, their financial report shows that they have approximately $1.2 billion of the $2 billion raised in 2021 as cash on hand, a debt of only around $26 million, and a negative cash flow of just over $200 million. While cash drain will likely increase as they transition from an idea to a business and build their production plant, their track record thus far indicates reasonable cash flow management.
Considering the overall appeal of the flying car industry, JOBY has the potential to offer significant returns in a relatively short period. However, it’s worth noting that this may have already occurred. JOBY went public through a SPAC deal in 2021, initially falling below the $10 SPAC share price and reaching a low of $3.15 earlier this year. Although it has experienced some volatility, currently trading below $7, there are three reasons to consider investing.
Firstly, this is a long-term investment, so the exact entry point is not crucial. Tesla (TSLA) provides an example of a similar situation, where if you had bought their stock in January 2019 at a high price, you wouldn’t have seen that level again for around ten months. Secondly, the retracement of JOBY’s price has stalled around the 60% mark, which is close to the 61.8% Fibonacci level. This indicates a potential reversal or pivot point. Lastly, JOBY appears to be susceptible to a short squeeze, as around 13% of its float is currently held short. This, combined with its status as a meme stock and the appeal of its plucky, futuristic narrative, could lead to increased buying pressure.
It’s important to recognize the high level of risk associated with buying JOBY at any entry point. The company is making a significant bet on itself before knowing the customers’ appetite for their product, which could result in either great success or spectacular failure. However, if you have some disposable cash and are looking for a potentially rewarding investment, JOBY is worth considering.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
