Multiple Bagger Probe: Joby Aviation (JOBY)

This article is about the trajectory of JOBY to a 100 Bagger, inspired by that of TESLA.

JOBY Aviation is an ambition of an airborne version of Tesla. It now has a market capitalization of around 2.5 billion U.S. dollars, which was equivalent to the market cap of Tesla when the EV manufacturer went public back in 2010. From the perspective of market potential and technical feasibility, Joby is definitely one of the candidates to duplicate Tesla in the business of air taxi.

Tesla itself has been a 100-bagger from its IPO in 2010 at a market cap of around 2B through the end of the 2nd quarter of 2020 to reach a market cap of 200B, in a mere decade. Meanwhile, Joby went public in the middle of 2021 through a merger with SPAC, when it was valued at almost $5B right after it went public. Subsequently, as the overall market situation deteriorated and its investors became more and more impatient with the progress, Joby’s market capitalization dropped to $2B at the end of 2022.

So when the valuation and the business match those of Tesla at the same stage, let’s borrow the trajectory of Telsa’s production and stock price to shed some light on Joby’s future.

The chart above is a little bit messy, but basically the four blurred pink dots on the market cap line illustrated the four key points in the history of Telsa.

1. In June 2010, Tesla went public with a market cap of around $2B and a revenue of somewhere around $100M.
2. In Jan 2013, with the debut of Model S in June 2012, the revenue began to ramp up and the stock price started skyrocketing. On March 7th, 2013, the financial statements reported ATH TTM revenue of more than $400M, and the market cap reached $4.4B, with stock price breaking through the consolidation ever since the IPO and hovering in the range of $30B to $60B for the upcoming years until the next turning points.
3. In the second half of 2019, boosted by the positive free cash flow for consecutive quarters, which means that Tesla eventually started generating value for its shareholders, the market cap soared out of the 5-year consolidation and reached $80B at the end of 2019.
4. In June 2020, exactly 10 years after the IPO, Tesla’s market cap topped $200B with a P/S of 10 and officially became a 100-bagger.

In the hindsight, TSLA deviated a little bit from the dual-booster 100-bagger model because its 100-fold was totally achieved by growing revenue with little help from the inflation of the P/S multiple.

Now let’s get down to Joby with the trajectory of Tesla in hand to study how JOBY could become the next 100-bagger mimicking the course of TSLA. In the first place, let’s take the plan/projection from the management of Joby and the inspection of the key assumption will be followed.

1. In January 2023, the market cap of JOBY is around $2B with NO revenue. This point is roughly in line with the start of Tesla as a public company, although TSLA was better off at that time with a $100M revenue. The major models of production for both, nevertheless, are in development: Model S for Tesla and JAS4–1 for Joby. From this point of view, they share a similar starting point.
2. Joby claims that by 2026 it will have 963 aircraft producing revenue. The annual number of aircraft production will increase from 19 in 2023 to 550 by 2026. Also according to the management, the revenue generated by those eVTOL vehicles in service is expected to be $2B.
3. The management is also projecting that by 2031, there will be 14,000 Joby’s eVTOL vehicles in service generating $20B annual revenue.

Joby’s business model differs from Tesla’s because it will be not only a manufacturer but an air-taxi service provider. Besides, before Joby could be able to manufacture any vehicles or provide any air-taxi service, its product has to be certified by the FAA, which could be a significant checkpoint in the company’s evolution. With those taken into account, a possible trajectory of Joby’s market capitalization growth could be illustrated.

1. When the JAS4–1 gets the FAA certificate to operate commercially, the market cap will jump to above $5B and the route to $10B will be opened.
2. When the mass production is on the way and the revenue starts to ramp up, even if 1,000 vehicles by 2026 has not been fulfilled, a high PS multiple could possibly be granted by the market to bring the market cap to $30B — $50B, just like the 2nd stage of TSLA.
3. Once the products and services expand globally and the economy of scale kicks in to enable the company to live on with a positive FCF, the market cap should start another rapid accumulation.
4. Any time the annual revenue of the company reaches $20B with a yearly growth rate of 20%-30% and positive FCF, the P/S will by no means be lower than 10, which would take the market cap to $200B and give birth to another 100-bagger by then.

The major obstacles, nonetheless, standing between the present $2B and the ideal $200B market cap in the upcoming 10 years as suggested by the management are the FAA certification and the ability to execute well enough to turn the excellent prototype into a mass-produced product, which has been widely questioned. For example, the most famous short report on Joby must be this one: Joby Aviation (JOBY): “Uber Meets Tesla In The Sky” Is Set To Crash And Burn.

Excluding the skepticism of the future demands of air taxi, which is the solely most important logic behind the investment in Joby, the two pieces of questioning could be defended.

Although the FAA is truly notorious for delaying or turning down applications for certification, since President Obama opened the gate to the government-dominated space industry to the private capitals, however, the FAA has become more and more friendly to private aero or space companies, with SpaceX being an excellent example. Joby has been reporting from time to time that the company has been working actively and closely with the FAA. Recently the FAA has made a progress by issuing Special Class Airworthiness Criteria, and Joby claimed that it has completed the second of four system reviews with the FAA, both of which could be deemed as very positive progress toward the final certification.

The second skeptic is all about the absence of evidence of turning the prototype into a marketable product because there is no manufactory and no inventory buildup for mass production. This one is even easier to defend. The average construction time of Tesla’s four gigafactories is around one year, therefore given that JAS4–1 is halfway to the FAA certification, starting the construction of a manufactory for mass production is a little bit premature. On the contrary, any sign of construction of such a factory could be interpreted as a positive message of the incoming certificate.

In a nutshell, even if the promising air-taxi market is large enough to justify huge risk-on appetite, Joby at the present time should be taken as a venture investment with a close eye on its key milestones. Joby has a great potential to mimic Tesla to go 100-folded within a decade but only with all milestones reached and left behind one by one.