Flying cars have long been the stuff of sci-fi films and cartoons like The Jetsons. But this year the first ever electric vertical take-off and landing (eVTOL) aircraft have been delivered to customers. And flying taxi services are due to start in 2025. Here, I’ll consider which eVTOL stocks to buy for my ISA next year.
Market leader
First we have Joby Aviation (NYSE: JOBY), often dubbed the “Uber of the sky“. The shares have doubled year to date, though they’re still down around 35% since they went public in August 2021.
The company has completed 84% of stage-three certification with the Federal Aviation Administration (FAA). This keeps it on course to begin its commercial sky-hailing service in 2025.
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Its four-passenger air taxis can fly up to 100 miles on a single charge, with a trip from Manhattan to JFK International Airport taking seven minutes rather than an hour or more by car. With its many existing helipads, New York is set to be one of its first launch markets.
Joby has a partnership with Delta Air Lines and delivered its first electric aircraft ahead of schedule to the US Air Force in September. I’d expect many more orders to come in as organisations aim to decarbonise their operations.
One risk I see here though is the market cap of $4.8bn, which reflects high investor expectations. Any deviation from its commercial timeline and the shares could pull back sharply.
That said, the company had $1.1bn in cash and equivalents at the end of September. So its current cash burn rate could double and it would still have enough capital to last until 2025.
Finally, I note the stock is held by Scottish Mortgage Investment Trust. The managers are excited by Joby’s mission “to save one billion people one hour per day“.
Midnight is upon us
The second eVTOL stock, Archer Aviation (NYSE: ACHR), has more than trebled in 2023.
The company’s first aircraft, Midnight, has 12 small propellers rather than one large rotor, making it nearly 1,000 times quieter than a helicopter. Production is slated to begin in mid-2024.
One thing I like here is the firm’s blue-chip backers, including Boeing, Stellantis and United Airlines. It has raised over $1bn in funding from such investors.
This is a massive endorsement of its technology, given that the likes of Boeing probably know a thing or two about aircraft engineering.
With a market cap of $1.9bn, Archer is smaller than Joby, so may have higher potential to grow fast. However, it also faces the same risk of potential delays to its 2025 commercialisation schedule.
A basket approach
Flying taxis combine the speed of helicopters (up to 200mph) with the near-silent and greener nature of electric vehicles. They’re built for a net-zero world.
Morgan Stanley predicts there will be thousands of them above major cities in future, making this a $1trn (yes, trillion) market by 2040.
This is why I started to pick up shares of both, as well as Lilium, another eVTOL stock, earlier this year.
However, this nascent industry carries many risks, meaning these shares are only suitable as a small part of a well-diversified portfolio.
My plan is to accumulate more shares on dips while continuing to take a three-pronged basket approach.
