Should You Buy Joby Aviation While It's Below $7.50?

Flying taxis could revolutionize transportation, and the upside potential is massive. According to Morgan Stanley, the market value of urban air mobility could be $1 trillion by 2040 and up to $9 trillion by 2050. Last month, the Federal Aviation Administration (FAA) announced new regulations for flying taxis, outlining the operational framework and marking a significant milestone in making these vehicles a reality.

While the industry is still in its early stages, Joby Aviation (NYSE: JOBY) is one of the top companies making significant strides. Supported by financial backing from Toyota Motor, Joby is advancing rapidly in developing and manufacturing this transformative technology.

With Joby Aviation trading under $7.50 per share, investors may wonder if now is the right time to enter this budding market. Let's explore the business, industry dynamics, and expectations for the next few years.

Joby's flying vehicles could transform transportation as we know it

Joby Aviation has been developing electric vertical takeoff and landing (eVTOL) aircraft for over a decade and a half. eVTOL are flying vehicles that take off, land, and hover vertically, using electric motors powered by modern battery technology. This mode of transportation is like a helicopter, except the electric motors allow for quieter operation while limiting pollution from emissions.

What makes eVTOLs appealing is their ability to operate in small spaces. The technology can potentially change urban transportation as we know it, replacing gridlock land-based traffic. It can also transport lifesaving medical supplies or other packages quickly and efficiently.

Over the past several years, Joby has made significant progress with its vehicles, completing over 1,000 test flights and well on its way to earning airworthiness certification from the Federal Aviation Administration (FAA).

Today, one of Joby's top competitors is Archer Aviation, but the two companies take distinctly different approaches to their business. For example, Joby is a vertically integrated company that develops and manufactures components and systems in-house, whereas Archer relies on legacy aerospace suppliers.

By developing its components in-house, Joby could develop a higher-performing eVTOL that can reach higher and have a more extended range, but it is at the expense of higher costs. In contrast, Archer's approach is less capital intensive, allowing it to run a leaner business and potentially get to market sooner.

Image source: Joby Aviation.

Developing this new technology isn't cheap and requires the backing of investors to make it possible. The company recently got good news when Toyota Motor committed to invest an additional $500 million in Joby, as it plans to establish a manufacturing alliance to support the first phase of commercialization. This brings Toyota's total investment to $894 million and gives Joby $1.4 billion in cash and investments, extending its runway as the company continues to burn cash.

What's next for Joby?

In October, the FAA took a significant step toward the future of advanced air mobility (AAM) travel by releasing its final Special Federal Aviation Regulation (SFAR) on powered-lift pilot certification and operation. The new rule paves the way for the widespread use of air taxis and is viewed as "broadly positive" by the investment bank Canaccord.

This month, Joby Aviation announced that construction has begun on the first vertiport in its planned Dubai air taxi network. Located at Dubai International Airport (DXB), the vertiport is being constructed by Dubai Road and Transport Authority, or RTA, and Skyports. The facility will include two takeoff and landing stands, each equipped with Joby's Global Electric Aviation Charging System to support rapid vehicle charging and conditioning between flights.

The vertiport at DXB is the first of four locations that will form the backbone of Joby's network of vertiports, with a planned launch in 2025. Three additional vertiports are planned for development in Palm Jumeirah, Dubai Downtown, and Dubai Marina.

Is Joby Aviation a buy?

Joby Aviation is one of the leading companies developing eVTOL technology, which could change urban transportation as we know it. The company has made excellent progress in getting to this point, and regulators have taken steps toward getting this technology off the ground. That company is also well capitalized, thanks to recent funding from Toyota.

That said, the Joby stock is a story-driven one for now. It will take some time for Joby to get all the necessary approvals from regulators, scale up its manufacturing, and achieve commercial operations.

Even so, it could take longer for the public to accept this mode of travel in a way that moves the needle and generates serious cash flow for the innovator. Joby's growth story is still early and will take years to play out, making the stock best suited for aggressive investors with a long investment horizon.

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Courtney Carlsen has positions in Morgan Stanley. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.