Joby Aviation stock price could tumble by ~20% despite FAA surge

Joby Aviation (NYSE: JOBY) stock price has been a breakout star this year as investors cheer the upcoming launch, its DoD contract, and its first-mover advantage in the industry. The shares jumped to $9 on Wednesday, ~185% above the lowest level in January.

Is JOBY a good investment?

Joby Aviation is a company that aims to disrupt the transport industry. The company has spent the past few years building its electric vertical takeoff and landing (eVTOL) products. In this period, the firm has spent billions of dollars. 

The most recent financial results showed that the company had over $1 billion in cash in its balance sheet. That is a strong number for a company that has been burning cash in the past few months. Its net loss has jumped from $114 million in 2020 to over $309 million in the past four quarters. 

These losses are expected to continue in the foreseeable future. As a result, the company decided to raise over $180 million through a secondary offering. That capital raise happened at an ideal period when the Joby stock price was rising.

Investors have also cheered the company’s business with the Department of Defense. It now has a contract whose value could jump to $131 million in the next few years. The first two aircraft are expected to be delivered in the first half of next year. 

Most importantly, Joby’s certification by the FAA is going on well. On Wednesday, the company received a FAA certificate for its first prototype. 

Despite all this news, I believe that Joby Aviation is grossly overvalued considering that its market cap has jumped to over $4 billion. I expect that the firm will need to raise additional capital in the next few years. Indeed, analysts expect it to break even in 2029. Also, the company still has an unproven business model.

Joby Aviation stock price forecast

JOBY chart by TradingView

The daily chart shows that the Joby Aviation share price has been in a strong bullish trend in the past few months. As it jumped, the shares formed a cup and handle pattern. In price action analysis, this pattern is usually a bullish sign, which explains why the stock jumped. 

Joby’s stock is still above all moving averages, signaling that buyers are in control. Despite these gains, I suspect that the shares will likely resume the downward trend. If this happens, the initial support level to watch will be $7.15, which is about 20% below the current level. A move below this level will see it drop to $6.

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