J.P. Morgan analyst Bill Peterson has recently made a call regarding aerospace start-up Joby Aviation (ticker: JOBY). In his analysis, Peterson suggests that it may be wise to take profits on the stock after its recent run-up, particularly if the surge cannot be justified solely by improving company fundamentals.
Downgrade and Price Target
On Wednesday, Peterson downgraded Joby Aviation shares from Hold to Sell. However, he did raise his price target for the stock to $6 from $5 per share.
Joby Aviation and its eVTOL Aircraft
Joby Aviation specializes in the production of electric vertical takeoff and landing (eVTOL) aircraft. These aircraft, also known as flying cars, are designed to be quieter and easier to fly, making them ideal for urban environments.
Pre-market Trading Reaction
Following the Sell call, Joby Aviation stock experienced a 6.5% drop in premarket trading, reaching $9.42 per share. Conversely, S&P 500 and Nasdaq Composite futures saw slight increases.
Despite the decline mentioned above, Joby Aviation shares have made significant gains in recent months. Over the past three months alone, the stock has risen by over 140%. A key factor contributing to this surge is the progress made towards certifying the company’s aircraft. In fact, Joby received a special airworthiness certificate from the Federal Aviation Administration in June, allowing them to test their prototype.
The Downgrade Rationale
Rather counterintuitively, the good news regarding certification served as the catalyst for Peterson’s downgrade. In his statement, Peterson acknowledges Joby Aviation as a leader in the field but reveals that he sees limited near-term upside potential for the stock following its period of outperformance. As a result, J.P. Morgan has downgraded Joby Aviation to an Underweight rating, which is equivalent to a Sell recommendation.
While Joby Aviation’s recent progress is commendable, J.P. Morgan analyst Bill Peterson suggests taking profits on the stock given the run-up and limited near-term potential. Investors should carefully consider this recommendation to make informed decisions regarding their holdings.
eVTOL Makers Show Strong Performance
Notable analyst, Peterson, has recently discussed the progress and potential of three electric vertical takeoff and landing (eVTOL) companies: Joby Aviation, Archer Aviation, and Lilium. In his analysis, he maintained a Buy rating for Archer Aviation, with a price target of $6. However, he only gave a Hold rating for Lilium, without providing a specific price target.
Both Archer and Lilium stocks have experienced significant growth over the past three months, with increases of approximately 170% and 195% respectively. This surge in value appears to be driven by a risk-on attitude among retail investors and short covering, rather than fundamental factors. When short sellers sense positive momentum in a stock, they may rush to buy back shares, causing prices to skyrocket.
Compared to companies in the S&P 500, the eVTOL start-ups have a higher short interest ratio of about 8%. Despite this, Archer remains the most favored eVTOL stock among analysts, with 83% of them giving it a Buy rating. In contrast, Joby and Lilium have lower Buy ratings, with only 43% and 40% of analysts recommending them respectively.
The average analyst price target for Archer is $8.25, while Joby has an approximate target of $8.20 per share. As for Lilium, the average price target stands at $3.33 per share.
It is evident that the eVTOL industry is experiencing significant attention and growth, but investors should take note of the speculative nature surrounding the current market trends.