Are eVTOL stocks Lilium and Joby Aviation ready for take off?

on Jan 17, 2024
  • The eVTOL is an industry that is aiming to disrupt urban transportation.
  • Joby Aviation and Lilium are some of the biggest players in the industry.
  • The two companies have made progress but are still burning cash.

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The transportation industry is changing as companies bring in new products to solve challenges like emissions, convenience, and traffic. Companies like Tesla, Rivian, and Byd have become multi-billion dollar entities after disrupting the electric vehicle (EV) industry that sold millions of cars in 2023.

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Are eVTOL’s the future?

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Electric Vertical Take-Off and Landing (eVTOL) is another area that experts believe can help to solve some of these challenges, especially in urban centers. eVTOLs are helicopter-like vehicles that can take off vertically and fly safely. In most cases, these vehicles are designed for urban centers such as movements from airports to city centers.

The eVTOL industry is not new as many companies have been working on the technology for years. However, there is a sense in which the industry is about to take off now that regulators have given a go-ahead on a few eVTOL companies like Lilium and Joby Aviation.

Some experts believe that the eVTOL industry will likely change urban transportation for the better. For example, a recent report estimated that the industry will have a CAGR of 52% from 2023 to 2030. The report estimated that the industry was valued at $1.2 billion in 2023 and that it will hit $23 billion by 2030.

To be clear. We have seen several disruptive technologies seeking to disrupt the industry that have failed. For example, Bird, a company that was once valued at over $2.5 billion filed for bankruptcy. Bird wanted to disrupt the industry by offering sharable scooters in key cities. Similarly, stocks of most EV companies like Fisker and Mullen have also plunged.

These risks, together with their cash burn, explain why eVTOL companies like Lilium (LILM) and Joby Aviation (JOBY) have retreated by 92% and 45%, respectively, since going public during the Covid-19 pandemic.

Lilium vs Joby

Lilium vs Joby Aviation stocks

Outlook for Lilium and Joby Aviation stocks

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Lilium and Joby Aviation have made progress in the past few years as they prepare for their official launches. In Europe, Lilium recently partnered with Lufthansa, the biggest airline in Germany. It also partnered with CITIC, a leading Chinese company. This is notable since China, with its huge cities and growing middle class is a good target market for the company.

Lilium has also won approvals from EU and US regulators and is now working towards manufacturing. It has already received over 600 orders, which is substantial since each of its pioneer planes is expected to cost between $7 million and $10 million.

The challenge for Lilium investors is that it is still burning cash and diluting its investors. In November, it filed to sell 5 million class A shares. Similarly, in September, it disclosed a stock offering of 40 million shares. It also raised $192 million in July and this trend will continue.

Joby Aviation, an American company, has also made progress in the past few months. It has moved into stage three of certification by the Federal Aviation Agency (FAA). It also delivered its first plane to the US Airforce as part of a $131 million contract. 

Most recently, the company expanded its partnership with NASA, ANA Holdings, and Nomura Real Estate. Joby Aviation also has ample resources with over $1 billion in cash.

Are Lilium and Joby Aviation good investments?

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Lilium and Joby Aviation are at a pole position in the eVTOL industry. As such, if their concepts work, they could grow to become disrupters in the sector. However, they still have a lot of work to do before the industry goes mainstream.

Most importantly, I suspect that these companies will need to raise cash to fund their development, which will lead to dilution of existing investors. Therefore, in this case, I’d stay in the sidelines and wait for more development before investing.

Going short Lilium and Joby is quite risky because of their high short interest, which stands at 7.6% and 18% respectively. The risk is that they could have a short squeeze as we saw with GameStop and AMC.

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