Joby and Archer Are Racing to FAA Certification While Burning Hundreds of Millions a Year. Here's the 1 Number That Picks the Winner.
Joby Aviation and Archer Aviation are racing to FAA certification, but the process won't determine the long-term winner. Joby is generally considered ahead, but certification will unlock more value for Archer Aviation.
Intelligence analysis by Llama
Joby Aviation and Archer Aviation are competing to achieve FAA certification, but the process is just one step in their development. Joby is ahead, but certification will be more valuable for Archer Aviation.
Imagine you're on a relay team, and the first leg is a race to get a special permit. Joby Aviation and Archer Aviation are racing to get this permit, but it's just the first step. Joby is ahead, but the permit will make both companies safer and more valuable.
Analysis
FAA Certification: A Crucial Milestone for Joby and Archer Aviation
The Federal Aviation Administration (FAA) certification process is a crucial milestone for both Joby Aviation and Archer Aviation. While the FAA certification won't determine the long-term winner, it will immediately de-risk the stocks and change the investment narrative from 'burning cash in risky development' to 'investing cash to scale growth' for both companies.
Joby Aviation is generally considered ahead in the certification process. The company conducted its first FAA-conforming eVTOL flight in early March and has five of its electric air taxis in the air, including its first FAA-conforming aircraft. In contrast, Archer Aviation's management has not said it has produced an FAA-conforming aircraft, although CEO Adam Goldstein did say that the company is actively working with the FAA on for-credit testing this year.
However, the FAA certification process is just one step in the development of both companies. Joby Aviation's focus is on becoming a vertically integrated transportation-as-a-service (TaaS) company that builds, owns, and operates its eVTOLs, while Archer Aviation's focus is on being an original equipment manufacturer (OEM). While the distinction is somewhat blurred, it helps explain why early FAA certification is arguably more of a game changer for Archer Aviation.
Simply put, Archer Aviation is likely to generate more upfront revenue and cash flow from OEM sales. In contrast, Joby Aviation's business model entails building a TaaS network before it receives significant recurring revenue from ride services.
What Investors Should Look for in Both Companies
For Joby Aviation, the key milestone to follow as it moves toward 100% credit testing is achieving FAA TIA, which will allow final testing to begin. For Archer Aviation, it's building its FAA-conforming eVTOL and having its pilots fly it. Joby looks likely to achieve FAA certification first, but arguably, certification will unlock more value for Archer Aviation.
Winning the Race is Important, but Think of it as the First Leg in a Relay Race Rather than a One-Off Sprint
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Key points
- Joby Aviation and Archer Aviation are racing to achieve FAA certification.
- Joby Aviation is generally considered ahead in the certification process.
- Early FAA certification is more of a game changer for Archer Aviation.
- Archer Aviation is likely to generate more upfront revenue and cash flow from OEM sales.
- Joby Aviation's business model entails building a TaaS network before it receives significant recurring revenue from ride services.
If Joby Aviation achieves FAA certification first, it could unlock more value for the company. Additionally, Archer Aviation's focus on being an OEM could lead to more upfront revenue and cash flow.
If Archer Aviation fails to achieve FAA certification, it could lead to a decline in the company's stock price. Additionally, Joby Aviation's focus on building a TaaS network could lead to a delay in the company's ability to generate significant recurring revenue from ride services.
