Joby Aviation Stock: Buy, Sell, or Hold?

Joby Aviation (NYSE: JOBY), a developer of electric vertical takeoff and landing (eVTOL) aircraft, went public by merging with a special purpose acquisition company on Aug. 10, 2021. Its stock opened at $10.62 on the first day, but it only trades at around $9 as of this writing. It didn't attract much interest because it was barely generating any revenue and racking up steep losses. Rising interest rates also drove many investors toward more conservative investments.

But could Joby actually be a good long-term play on the nascent eVTOL market at these levels? Let's review the bearish and bullish arguments to decide.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. See the 10 stocks »

Image source: Joby Aviation.

What does Joby do?

Joby's first commercial eVTOL aircraft, the S4, carries one pilot and four passengers, lasts for 100 miles on a single charge, and has a maximum speed of 200 mph. It promotes the S4 as a cheaper, greener, and easier-to-land alternative to helicopters for air taxi services. It's also been developing a hydrogen-powered version that can be charged more quickly and travel up to five times farther than its current aircraft.

Joby holds a $131 million contract with the U.S. Department of Defense (DOD) to deliver up to nine eVTOL aircraft to the U.S. Air Force. It delivered its first S4 to Edwards Air Force Base in September 2023, and it plans to deliver the next two aircraft to MacDill Air Force Base this year. It plans to launch its first air taxi service in the United Arab Emirates this year.

The main reasons to sell or avoid Joby's stock

Joby's plans sound promising, but the bears will tell you it's still acting more like a start-up than a publicly traded company. Before it went public, it claimed it could generate $131 million in revenue in 2024 (the full value of its DOD contract) and grow that figure to $2.05 billion in 2026. But Joby clearly overestimated its own growth potential: It only generated $81,000 in revenue in the first nine months of 2024, and analysts expect it to generate $205,000 in revenue for the full year.

Assuming Joby gradually ramps up its deliveries, analysts expect its revenue to rise to $98 million by 2026. But with an enterprise value of $6.36 billion, Joby already trades at 65 times that estimate. By comparison, its main competitor, Archer Aviation, is expected to grow faster over the next two years and trades at 25 times its projected sales for 2026. Joby's sky-high valuation could limit its gains and set it up for a steep decline if it fails to scale up its business.

On the bottom line, Joby is expected to rack up annual net losses of at least $500 million in 2024, 2025, and 2026. To maintain its cash flow and subsidize its stock-based compensation expenses, Joby could continue to dilute its investors by issuing more shares. It's already increased its share count by 27% since its public debut. Meanwhile, its insiders have sold nearly twice as many shares as they bought over the past 12 months.

In short, Joby's bubbly valuation, sluggish expansion plans, persistent losses, ongoing share dilution, and chilly insider sentiment could all make it a stock to sell or avoid.

The main reasons to buy and hold Joby's stock

The bulls will argue that Joby's stock could soar even higher if the eVTOL market takes off. According to Grand View Research, the eVTOL market could expand at a compound annual growth rate of 54.9% from 2024 to 2030.

Joby is still firmly backed by big investors and partners like Toyota and Delta Air Lines, and it ended the third quarter of 2024 with a robust balance sheet with $710 million in cash and short-term investments. When combined with the $222 million it raised through a follow-on offering last October and Toyota's planned $500 million in additional investments, that total rises to about $1.4 billion.

That healthy liquidity and its low debt-to-equity ratio of 0.2 indicate Joby won't go bankrupt anytime soon. It should also attract more investors once it launches its air taxi service and makes more progress toward launching its first hydrogen eVTOL aircraft.

Lastly, Joby might eventually merge with one of its peers (like Archer Aviation) or be acquired by a major automaker or aviation company. If that happens, they'll likely pay a hefty premium -- even though it looks a bit pricey relative to its near-term sales.

What's the right move for investors right now?

Joby might expand significantly over the next few years, but too much of its future growth is already baked into its stock price. Archer Aviation, which is growing faster and trades at a lower valuation, seems like a more compelling eVTOL play. So instead of chasing Joby right now, it might be smarter to simply sell or avoid its volatile stock.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $369,816!*
• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $42,191!*
• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $527,206!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

Learn more »

*Stock Advisor returns as of January 27, 2025

Leo Sun has no position in any of the stocks mentioned. The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.