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JPMorgan Turns Cautious on Joby Aviation as Shares Soar
Downgrade and Market Reaction
JPMorgan analyst Bill Peterson has downgraded electric aircraft stock Joby Aviation from neutral to underweight. He believes that the recent surge in Joby's shares, which increased by over 60% at the end of June, is largely overblown and likely due to short covering rather than improving fundamentals. This year, Joby shares have seen a remarkable increase of 200%.
Risks and Long-Term Outlook
Peterson acknowledges Joby's strong management team and their execution on certification timelines and low-volume manufacturing plans. However, he warns that the commercialization of electric vertical takeoff and landing (eVTOL) aircraft will likely have a more gradual ramp-up than what is currently anticipated. Despite his concerns, Peterson believes that both Joby Aviation and peer company Archer Aviation will make progress towards certification by 2025.
eVTOL aircraft for the transportation of people now has serious commercial potential
Price Target and Entry Point
While lowering the rating on Joby Aviation, Peterson increased his price target to $6 per share from $5, indicating a downside of 40% from the previous day's close. As a result of the downgrade, Joby's shares dropped nearly 7% in premarket trading. Peterson suggests that investors wait for a better entry point before considering Joby as an investment opportunity. He believes that Blade Air Mobility may be a safer option for investors looking to enter the advanced air mobility trend, as the company already has proven use cases with helicopters.
Long-Term Sector Outlook
Despite the near-term concerns, Peterson maintains a positive outlook on the electric aircraft sector in the long run. He believes that Blade Air Mobility, with its gradual transition to eVTOL, is well-positioned to perform better in the near term. Peterson advises short-term focused investors to consider Blade Air Mobility as a potential investment option, while still believing in the long-term potential of Joby Aviation and the industry as a whole.
Evaluating the Impact on a New Business
The cautious stance taken by JPMorgan on Joby Aviation's stock and the subsequent market reaction sparks an interesting discussion on how this development may impact a new business in the electric aircraft sector. For entrepreneurs looking to enter this industry, it is crucial to analyze the insights provided by JPMorgan analyst Bill Peterson and consider the potential implications.
One key takeaway is the importance of monitoring market trends and assessing the underlying fundamentals of a company. The recent surge in Joby Aviation's shares, driven by short covering rather than improving fundamentals, highlights the need for new businesses to establish a strong foundation and justify their valuations through tangible achievements.
Furthermore, Peterson's warning about the gradual ramp-up of commercialization in the electric vertical takeoff and landing (eVTOL) aircraft sector should not be overlooked. This suggests that startups entering this market should anticipate a longer timeline for achieving widespread adoption and adjust their business strategies accordingly.
While Peterson suggests waiting for a better entry point and indicates Blade Air Mobility as a potentially safer investment, it is important for new businesses to conduct thorough market research to identify their unique value proposition and competitive advantages. It may be prudent to learn from Blade Air Mobility's approach, which demonstrates proven use cases with helicopters, while also considering the long-term potential of Joby Aviation and the industry as a whole.
In conclusion, new businesses seeking to venture into the electric aircraft sector should carefully consider the lessons from JPMorgan's cautionary analysis on Joby Aviation. By understanding market trends, managing expectations for commercialization, and developing a compelling business strategy, entrepreneurs can position themselves for success in this evolving industry.
Article First Published at: https://www.cnbc.com/2023/07/19/jpmorgan-downgrades-joby-calls-recent-stock-surge-largely-overblown.html
