The pace of technological change is accelerating so much that it's now normal for the fanciful to become reality, and then something of a standard. Witness, for example, the rapid ascent of electric vehicles (EV), which are now commonplace on our roads.
It looks like this transformation is also about to happen with cutting-edge air taxi developer Joby Aviation (JOBY -2.51%). Despite a few recent pullbacks, the company's share price has rocketed dramatically higher this year thanks to several favorable developments.
It's an exciting stock, but given that rise, is it now overvalued?
Ready for takeoff
Joby's specialization is electric vertical takeoff and landing (eVTOL) taxis. The company's four-passenger craft, which share certain aspects of both helicopters and propeller airplanes, have a small profile and are therefore ideal for tight urban environments. These will be the inaugural markets for air taxi services.
And they might open sooner than you think. In October, the Federal Aviation Administration (FAA) took a big step toward sanctioning such services. It went so far as to introduce a new category of air transportation, powered lift -- which includes air taxis. This came not long after the company got the green light to operate air services for customers. So Joby's ambitions are hardly -- pardon the pun -- pie in the sky.
Meanwhile, the craft that will ferry the first customers are currently in active flight testing, and Joby recently flew an exhibition flight in New York City. Its initial ambitions are to launch services both in that municipality and in car-clogged Los Angeles. It's also making significant inroads abroad already, with a pending application to become the first air taxi service in the United Arab Emirates and with construction underway for a "vertiport" in Dubai.
The company has also secured different types of partnerships with powerful businesses in the transportation sphere. In October 2022, it signed a deal with Delta Air Lines to integrate Joby's operations in a home-to-airport air taxi service. Cutting out the often stressful and long rides to/from the terminal is an attractive proposition for travelers, many of whom would likely be willing to pay a premium for a far easier commute.
Delta's involvement came with a $60 million investment in Joby, and it's not the only well-known enterprise adding to the company's capital base. In a series of investments over the past few years, auto industry giant Toyota Motor has committed $894 million to the air taxi specialist to help fund its continued development work.
A potential high flyer
As it ramps up to full regulatory certification and the launch of its services, Joby is still in an early stage. It isn't quite pre-revenue, as it earns some coin by developing air taxis for testing and experimentation for the U.S. government's Department of Defense. Still, like many an early-stage business, its expenses far outstrip its top line. In its third quarter, Joby's revenue amounted to only $28,000, while operating expenses ate up nearly $156 million.
Yes, it's burning cash like any fast-moving start-up. Thankfully, it's got some greenbacks at its disposal -- $710 million in cash and short-term investments at the end of that quarter, which doesn't take into account Toyota's most recent buy-in (of $500 million) or a recent equity offering that raised around $222 million. And if Toyota and Delta are eager to invest generously, other well-capitalized, strategic investors likely can be found if need be.
All this still makes Joby a speculative investment. The technology is promising, and the service seems as if it'll be compelling. Yet this is an expensive business, and there's often a vast difference between plans and reality. My gut feeling is that Joby is on the right (flight) path, and given how far along it's come, it stands a good chance of grabbing crucial first-mover advantage in the air taxi space.
I like the stock. However, I have to stress it's a play only for investors with a high tolerance for risk.
