Is Joby Aviation's recent acquisition of Blade marking a brilliant strategic move, or is Blade an overvalued asset?
Joby Aviation, a development-stage company specialising in electric vertical takeoff and landing (eVTOL) technology, has made a significant move in the urban air mobility market. The company has acquired Blade Air Mobility's passenger business, a decision that could potentially reshape the industry.
The acquisition, which cost Joby up to $125 million, provides the company with immediate market access in New York City and Southern Europe. Blade flew over 50,000 passengers in 2024, primarily in the New York City area, offering Joby a solid customer base to build upon.
However, the constraints to scaling an urban air mobility business aren't the advanced technology that eVTOLs provide, but price and access, which doesn't change going from a helicopter to an eVTOL. A Blade ride from Manhattan to JFK Airport starts at $195 per seat, making it not price-competitive with a taxi, rideshare, or another form of transportation.
Joby's market cap has ballooned to more than $16 billion, making it more valuable than both American Airlines and Southwest Airlines. This valuation, however, seems to be a subject of debate among investors. The eVTOL market shows signs of possible overvaluation due to technological and regulatory uncertainties, the high cost of developing safe, reliable aircraft, limited current demand as pilot operation is still required, and overall nascent market size despite strong growth projections.
Joby's stock rose 18.8% on Monday, representing a $2.7 billion gain in market cap. This surge in value could be attributed to the acquisition, but there seems to be a disconnect between the $125 million price and the nearly $3 billion boost in Joby's market cap.
Investors seem to be taking the wrong lesson from Blade's acquisition. Despite being acquired by Joby, Blade, despite its size, failed to disrupt urban transportation. The market for air travel and the profit potential in the eVTOL industry are being grossly overestimated by investors, as shown by Blade's relatively small size.
The deal does not include Blade's medical division, which will remain a separate publicly traded company named Strata Critical Medical. Joby will become Blade's preferred VTOL partner for Blade's organ transport business.
The acquisition gives Joby ownership of Blade's best-known brand in the urban air taxi mobility market. As for Blade's stock, it jumped following the announcement of the deal.
High expectations are baked into Joby Aviation stock, but the company has made barely any sales. This disparity between valuation and performance could be a cause for concern for some investors.
In conclusion, while the acquisition of Blade Air Mobility's passenger business marks a significant step for Joby Aviation, the eVTOL market remains uncertain and highly speculative. As the company navigates through regulatory hurdles and works towards commercialising its technology, it will be interesting to see how Joby's valuation and market performance evolve.
