On Wednesday, Deutsche Bank (ETR:DBKGn) reaffirmed its Sell rating on Joby Aviation Inc (NYSE:JOBY) with a consistent price target of $4.00. Joby Aviation recently disclosed a substantial $500 million private investment from Toyota (NYSE:TM), which will be conducted in two equal tranches.
The initial tranche is expected to close later this year, with the second following in 2025, subject to regulatory approvals and manufacturing agreements. The investment price was set at $5.03 per share for 99.4 million shares, slightly above the closing price of $4.80 the day before the announcement.
This capital infusion is poised to bolster Joby's financial runway, with projected post-funding cash of approximately $1.2 billion at the end of the third quarter of 2024. This figure outpaces Joby's competitor, Archer, and includes additional funding from Stellantis (NYSE:STLA). Toyota's full commitment to the investment is viewed as a positive, likely mitigating the risk of market selling pressure due to Toyota's significant strategic involvement with Joby.
Following the transaction, Toyota will emerge as Joby's principal shareholder, possessing over 20% of the company with 178 million shares. This stake surpasses that of Joby's founder, JoeBen Bevirt, who holds 95 million shares, representing a 12% ownership.
Despite the influx of funds, concerns linger regarding Joby's financial needs as it progresses towards certification and commercialization. The company's expenditure for the current year is anticipated to exceed $450 million. Even with the new capital raise, additional funding between $300 million to $500 million might be necessary by late next year or early 2026.
Deutsche Bank also suggests that Joby's decision to secure funding at this juncture could be indicative of challenges in attracting institutional investors and concerns about the company's stock performance, which has not shown significant resilience despite a favorable macroeconomic environment for growth assets.
The analyst's previous reservations, as detailed in the report titled "Mixed signals," remain unchanged, leading to the decision to maintain the Sell rating and $4 price target.
In other recent news, Joby Aviation, a pioneer in electric air taxi development, has initiated the certification process to become an air taxi operator in the United Arab Emirates (UAE). This is a significant step following a definitive agreement with Dubai's Road and Transport Authority and a Memorandum of Understanding with multiple Abu Dhabi entities. The certification process involves a five-stage application process, including the development of operating manuals and facility inspections.
Joby Aviation has also been given a Buy rating by H.C. Wainwright, which highlighted the company's unique position as a vertically integrated player. The company's financial results for the second quarter of 2024 showed a net loss of $123 million, but a solid financial position with $825 million in cash and short-term investments was maintained.
The company has made significant strides in its certification process with the FAA, having completed 37% of stage four. Further developments include international expansion efforts, with a commercial launch in Dubai planned for the upcoming year.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Joby Aviation's financial position and market performance. Despite the recent $500 million investment from Toyota, Joby's financials remain challenging. The company's revenue for the last twelve months as of Q2 2024 stands at a modest $1.08 million, with an adjusted operating income of -$546.59 million, highlighting the significant costs associated with developing its electric vertical takeoff and landing (eVTOL) aircraft.
InvestingPro Tips indicate that Joby holds more cash than debt on its balance sheet, which aligns with the article's mention of the company's projected post-funding cash of $1.2 billion. This strong cash position could provide some reassurance to investors concerned about the company's ongoing capital needs. However, another InvestingPro Tip notes that analysts do not anticipate the company will be profitable this year, which corroborates Deutsche Bank's concerns about Joby's financial trajectory.
The stock's volatility, as mentioned in an InvestingPro Tip, is reflected in its recent price performance. Joby's shares have seen a 27.82% decline year-to-date, and the stock is currently trading at 77.98% of its 52-week high. This volatility underscores the market's uncertainty about Joby's path to commercialization and profitability.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Joby Aviation, providing a deeper understanding of the company's financial health and market position.
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