By Bill Alpert
It was takeoff time Tuesday for the long-grounded stocks of Joby Aviation and Archer Aviation. The two developers of electric vertical-takeoff aircraft got lifts as Needham & Co. launched coverage with Buy ratings.
The Federal Aviation Administration expects air taxi service to start in 2028, notes analyst Chris Pierce, and just issued final rules for pilots of these electric vertical takeoff and landing aircraft, or eVTOLs. Powered by batteries, this new class of aircraft will liftoff and land like helicopters, as they carry a half dozen passengers over distances of 100 miles or less.
"The FAA has signaled the long-term importance of the air taxi space within the U.S., introducing their Innovate 2028 plan to serve as a foundation for a U.S. air taxi industry and to ensure domestic competitiveness," Pierce wrote. As the Joby and Archer eVTOLs advance through the certification process, Pierce thinks Joby's stock could rise 30% and Archer's could double.
He admits that the stocks could take a few years to prove out, but the analyst's plug produced an immediate lift. Joby rose 12% to $6.30 in Tuesday trading, while Archer rose 16% to $5.13.
Investors will need patience, and some daring, to test Needham's recommendation. FAA approval for eVTOLs won't happen before 2026, and the analyst expects neither company will turn a profit before 2028. Still, Pierce projects that each company will surpass $4 billion in annual revenue by the end of the decade.
Both companies debuted in the giddy year of 2020, when such early-stage ventures were able to tap public markets by merging into special-purpose acquisition companies. Joby and Archer stocks are down 60% and 70% from their early peaks. Other eVTOL start-ups that came public around the same time are clipping the treetops: Lilium stock is down 99%, to nine cents.
There are investors who don't share Pierce's optimism. Some 27% of Archer's free-floating shares have been sold short, along with about 18% of Joby's. A worry is that the companies only have a year's worth of cash, at their current burn rates, and will dilute their current shareholders by issuing planeloads of stock.
Needham anticipates that each of the eVTOL firms will have to raise at least another $2 billion in capital. Joby has a reliable backer in Toyota Motors, which has already put in $900 million, including a $500 million commitment in October. Archer hopes to bring in cash by selling eVTOLs to airlines, starting in a couple of years.
For investors in no hurry to get anywhere, the eVTOL stocks could provide a thrill ride.
Write to Bill Alpert at william.alpert@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
November 19, 2024 17:29 ET (22:29 GMT)
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