Air Taxi Stocks Joby and Archer Soar After Upbeat Analyst Report
In a surprising turn of events on Tuesday, the stocks of Joby Aviation and Archer Aviation, two leading developers of electric vertical-takeoff and landing (eVTOL) aircraft, soared after Needham & Co. initiated coverage with strong Buy ratings. This development comes as the market becomes increasingly optimistic about the future of air taxi services, projected to commence in 2028, according to analyst Chris Pierce.
The FAA’s Role in Air Taxi Services
The Federal Aviation Administration (FAA) recently issued final rules concerning the certification and licensing of pilots for eVTOLs. This pivotal step signals the FAA’s commitment to fostering the burgeoning air taxi industry in the U.S. As Pierce noted, the FAA’s Innovate 2028 plan is designed to lay the groundwork for a robust air taxi framework, ensuring that the U.S. remains competitive in this innovative sector.
eVTOLs, which are powered by batteries, are engineered to take off and land vertically, similar to helicopters. They are expected to carry around six passengers for distances of 100 miles or less, reshaping urban transportation in a post-pandemic world keen on sustainability and efficiency.
Future Projections for Joby and Archer
As eVTOL technology continues to advance and both companies work through the FAA’s certification process, Pierce is optimistic about the stock performance of both firms. He predicts that Joby’s stock could rise by 30%, while Archer’s stock might double in value. However, he cautions that the journey to these projections will not be quick, and both companies could take several years to demonstrate their profitability.
Market Response to the Analyst Report
The immediate market response to the analyst’s positive report was notable. On Tuesday, Joby shares surged by 12%, reaching $6.30, while Archer’s stock witnessed a 16% rise, hitting $5.13. Such gains indicate a growing confidence among investors, although the eVTOL market’s volatility will require patience and bravery.
Challenges Ahead
Despite the optimism surrounding their growth potential, Joby and Archer face significant hurdles before they can claim success in the air taxi arena. According to Pierce’s analysis, FAA approval for eVTOLs is not anticipated before 2026, and neither company is expected to turn a profit before 2028. Nevertheless, Pierce forecasts that both companies could exceed $4 billion in annual revenue by the end of the decade.
Both Joby and Archer emerged in 2020, a year marked by vibrant market interest in early-stage ventures that utilized special-purpose acquisition companies (SPACs) to access public markets. However, the stocks of both companies are currently down approximately 60% and 70% from their respective peaks, reflecting a broader market skepticism, especially among their peers in the eVTOL sector.
Current Market Sentiment and Short Selling
The current market sentiment remains mixed; while analysts like Pierce express optimism, there is substantial caution among investors. Approximately 27% of Archer’s free-floating shares have been sold short, along with about 18% of Joby’s. One significant concern is that both companies only have enough cash to sustain operations for about a year at their current burn rates, leading to worries over potential stock dilution.
To sustain their operations and accelerate growth, both eVTOL firms will likely need to raise at least $2 billion in additional capital. Joby has secured significant backing from Toyota Motors, which has already invested $900 million, including a recent $500 million commitment. Archer, on the other hand, is looking towards selling eVTOL aircraft to airlines as a potential revenue stream within the next couple of years.
Conclusion: A Thrilling Ride for Investors
For investors willing to embrace long-term volatility and uncertainty, the eVTOL stocks of Joby and Archer could offer an exciting ride. While the road ahead may be fraught with challenges, the fundamental shift towards urban air mobility represents a revolutionary opportunity for growth. As the FAA continues to progress towards the establishment of a regulatory framework, the groundwork is being laid for what might be an entirely new mode of transportation — one that could define the future of commuting.
