Joby Aviation (NYSE:JOBY) surged today after the company posted a memorandum of understanding with Saudi conglomerate Abdul Latif Jameel that contemplates a $1 billion launch of Joby’s electric air-taxi service in the kingdom.
The jump comes on the heels of Toyota’s (NYSE:TM) fresh $250 million tranche last week, which by itself had lifted the stock roughly 25% and rekindled momentum that stalled earlier this year. JOBY stock is now 77.25% above its one-year low, though it is still 17.7% below its highs. Should you chase the upside potential, or should you take the gains? Let’s take a look.
Joby and Abdul Latif Jameel signed a memorandum that targets the delivery of up to 200 aircraft plus related services, potentially valued at about $1 billion.
The Saudi group will study infrastructure, maintenance, and pilot-training packages so that Joby’s craft can shuttle pilgrims, executives, and tourists across cities such as Riyadh and Jeddah. That promise, though non-binding for now, would open a Middle Eastern beachhead that none of Joby’s U.S. rivals yet control.
Investors already had Joby on their radar because Toyota funded the first half of a previously announced $500 million strategic investment on May 28. The new deal has boosted the stock due to the slew of good news coming in recently. Before that, Joby also flew two eVTOL prototypes simultaneously.
The biggest problem with “flying car” businesses is that they’re nowhere near profitable and still have a lot of money to burn through before they can reach any level of sustainability. If you look at Joby’s TTM financials, things are only looking worse.
It does have $813 million in cash, but it will have to raise a lot more. Profitability is likely close to a decade away, if ever.
As such, I’d only buy JOBY for short-term gains if you think more deals are coming. The downside risk is too big to chase this stock for a long-term investment.
The average price target at $7.75 implies just 3.3% upside.
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