We recently came across a bullish thesis on Joby Aviation, Inc. (JOBY) on ValueInvestorsClub. In this article we will summarize the bulls’ thesis on JOBY. JOBY shares were trading at closing price of $4.60 when this thesis was published.
Joby Aviation, Inc., a vertically integrated air mobility company, engages in building an electric vertical takeoff and landing aircraft optimized to deliver air transportation as a service. The company intends to build an aerial ridesharing service, as well as developing an application-based platform that will enable consumers to book rides. Joby Aviation, Inc. was founded in 2009 and is headquartered in Santa Cruz, California.
A futuristic electric vertical takeoff and landing aircraft soaring through the sky.
The global helicopter market was valued at $57 billion in 2022 and is expected to grow to $76 billion by 2030. The market for light and ultralight aircraft is projected to grow from less than $10 billion to $18 billion by 2028. Morgan Stanley predicts a $1 trillion total addressable market (TAM) for eVTOLs by 2040. The exact eVTOL market size by 2035 or 2040 is uncertain, but if Joby’s first-generation aircraft can outperform helicopters at competitive prices, the market will be substantial. Joby’s current valuation is attractive, especially given the lack of significant competition and potential subsidies.
Joby could capture 20% of a combined market of helicopters and light aircraft
A base case valuation approach using 2035/2040 TAM estimates suggests Joby could capture 20% of a nearly $100 billion combined market of helicopters and light aircraft by the end of the decade. This would result in a $45 billion valuation at 15% EBITDA margins and a 15x multiple, yielding a high teens internal rate of return (IRR). Joby’s progress in FAA Type Certification, strong technical talent, and substantial capital reserves support its growth potential.
Joby has successfully raised capital on favorable terms, distinguishing itself from other eVTOL, EV, or battery companies that went public via SPAC. Logical investors for further capital include auto and aircraft OEMs, hard-tech investors, and tech-focused funds. Given Joby’s market leadership and recent capital raises, its ability to secure additional funding on favorable terms is high.
Joby delivers its first eVTOL to Edwards Air Force Base
Despite short reports from Bleecker Street and Kerrisdale, which question Joby’s projections and unit economics, the company’s technical talent, market position, and progress in FAA certification remain strong. Joby’s recent accomplishments, such as delivering its first eVTOL to Edwards Air Force Base ahead of schedule, further bolster confidence.
Joby’s target for FAA Type Certification may extend to 2026, presenting buying opportunities. The company has sufficient manufacturing capacity for its current commitments and expects to ramp up production towards the decade’s end.
JOBY is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 15 hedge fund portfolios held JOBY at the end of the first quarter which was 23 in the previous quarter. While we acknowledge the potential of JOBY as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as JOBY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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