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Is Archer Aviation or Joby Aviation the Better Air Taxi Stock?

Updated: 24-10-2024, 11.09 AM

This week, the race to dominate urban air transportation hit a major milestone when U.S. aviation regulators released final safety rules for electric vertical takeoff and landing (eVTOL) aircraft. The news lifted shares of both Joby Aviation (NYSE: JOBY) and Archer Aviation (NYSE: ACHR), two leading eVTOL developers in the U.S., though both stocks have lagged the benchmark S&P 500 in 2024 by a wide margin.

The prize at stake in this emerging industry could be extraordinary. Analysts at the investment bank Morgan Stanley project the global urban air mobility market to reach $1 trillion by 2040, as electric air taxis promise to transform how people move through congested cities.

Let’s examine the core value propositions of these two pioneering companies to determine which stock is the better buy right now.

Toyota Motor Corporation (NYSE: TM) just poured another $500 million into Joby Aviation, bringing its total investment to $894 million. The Japanese auto giant will own over 20% of Joby once the second part of this investment tranche is funded in 2025.

Joby Aviation's production aircraft. — Image source: Joby Aviation.

Best of all, this landmark partnership extends far beyond capital investment. Toyota’s engineers are also working alongside Joby’s team in California to streamline manufacturing processes and scale production. That’s a big feather in Joby’s cap, one that could give the company an important competitive edge in the fiercely competitive eVTOL race.

Joby isn’t just focusing on the U.S. market. The company has also inked deals with Dubai’s Road and Transport Authority and Abu Dhabi’s government departments.

On the financial front, Joby’s $825 million in cash and short-term investments at the end of the second quarter provide significant operating flexibility as the company pushes toward commercialization. The air taxi pioneer has also completed an impressive 37% of stage four certification requirements and expects to accelerate this process through the remainder of 2024.

Archer Aviation has completed over 400 test flights this year for its aircraft Midnight, hitting this key operating goal four months ahead of schedule. The intensive testing program spans transition flights, high-rate operations, and landing profiles across various conditions.

Archer Aviation's Midnight aircraft on the tarmac. — Image source: Archer Aviation.

This impressive operational progress is matched by the company’s growing financial strength. In August, Archer announced the closing of $220 million of a planned $230 million capital raise, backed by transportation heavyweights United Airlines and Stellantis.

Moreover, the Stellantis partnership could unlock an additional $400 million in manufacturing support, just as Archer prepares to open its high-volume production facility in Covington, GA by year-end.

Archer’s momentum is attracting significant commercial interest, with Future Flight Global signing on for up to 116 aircraft worth up to $580 million. This deal not only expands Archer’s reach into Southeast Asia, Europe, and the Middle East, but also pushes its total order book to nearly $6 billion. To put this figure into perspective, Archer’s market cap presently stands at around $1.33 billion.

While both companies show promise, Joby’s Toyota partnership and stronger year-to-date stock performance suggest it may have an edge in this head-to-head match-up. After all, Toyota has been one of the best automakers in the world for decades and has the financial capacity to back this endeavor for however long it takes to succeed.

For investors looking to enter the urban air mobility space, both companies offer compelling yet different value propositions. While widespread adoption of air taxis may take years to materialize, the potential trillion-dollar market opportunity makes both stocks worth considering for those with long-term investment horizons.

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George Budwell has positions in Archer Aviation, Joby Aviation, and Toyota Motor. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.

Is Archer Aviation or Joby Aviation the Better Air Taxi Stock? was originally published by The Motley Fool