Joby and Archer Aviation shares soar after new Buy ratings but patience key for those stocking up

On Tuesday, Joby Aviation and Archer Aviation, two developers of electric vertical takeoff and landing (eVTOL) aircraft, saw their stocks surge after Needham & Co. launched coverage with optimistic Buy ratings.

Analyst Chris Pierce highlighted that the Federal Aviation Administration (FAA) had issued final rules for pilots of eVTOLs, paving the way for expected air taxi services by 2028.

“The FAA has signalled the long-term importance of the air taxi space within the US, introducing their Innovate 2028 plan to serve as a foundation for a US air taxi industry and to ensure domestic competitiveness,” Pierce noted.

The agency’s proactive stance signals a strong regulatory framework to support eVTOLs, which can carry up to six passengers for distances of 100 miles or less and operate like helicopters, albeit more quietly and efficiently due to their battery power.

Stocks jump but patience key to see predicted upside

Following Needham’s positive ratings, Joby Aviation's stock jumped 12% to $6.30, while Archer Aviation rose 16% to $5.13 on Tuesday.

Despite this rally, Pierce emphasized that investors will need patience as neither company is expected to generate profit until 2028, with FAA certification likely only by 2026.

The analyst projected a potential 30% rise for Joby and a possible doubling for Archer in the near term.

Joby Aviation, which still operates in a pre-revenue phase, holds a market capitalization of approximately $4.8 billion and is actively aligning itself for commercial launch.

Challenges and investor skepticism

Despite the optimistic outlook, some investors remain cautious.

Around 27% of Archer’s shares and 18% of Joby’s shares have been sold short.

Concerns include limited cash reserves, with each company holding about one year’s worth of funds at their current spending rate.

Needham forecasts that both companies will need to raise at least $2 billion in additional capital.

Toyota Motors, a major backer of Joby with $900 million already invested, remains a key financial supporter, while Archer aims to secure revenue by selling eVTOLs to airlines in the coming years.

Should you buy the stocks?

Both Joby and Archer made their stock market debuts in 2020 by merging with special-purpose acquisition companies (SPACs).

The journey since has been rocky; Joby and Archer stocks are down 60% and 70% from their initial highs, respectively.

In comparison, other eVTOL companies like Lilium have seen even steeper declines, with shares plummeting 99%.

While the path forward for these eVTOL pioneers will involve overcoming regulatory, financial, and technological hurdles, Needham’s ratings have reignited interest.

For long-term investors willing to weather the ride, Joby and Archer’s ambitious projects could eventually take flight.