What’s The Downside Risk For Joby Aviation?
Joby Aviation stock (NYSE: JOBY) has captured Wall Street’s imagination with its vision of electric vertical takeoff and landing (eVTOL) aircraft revolutionizing urban transportation. The stock has been on a remarkable journey, surging over 200% from levels under $6 a year ago to around $17 now. Why the excitement? It’s been a perfect storm of future mobility hype and momentum. First, there’s the broader electric vehicle and sustainable transportation narrative that’s swept through markets. Second, the “flying taxi” concept has investors dreaming of a sci-fi future becoming reality. Third, Joby has been making strategic moves – securing partnerships with major players like Delta Air Lines and Toyota, achieving certification milestones, and generating headlines that keep the buzz alive.
The company has been positioning itself as the leader in the emerging eVTOL market, announcing progress on FAA certification and building out its manufacturing capabilities. But here’s the sobering truth – yes, electric air taxis seem like the future, but it’s a future that’s still years away from meaningful commercial operations and revenue generation. Joby remains a pre-revenue company, burning through cash as it works toward certification and commercialization. Of course, it’s hemorrhaging money – this is aerospace development, one of the most capital-intensive industries in existence. For perspective, the company’s operating cash flows stood at -448 million and operating loss at $638 million for the last twelve-month period.
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Image by Artur Pawlak from Pixabay
The Fundamental Problem
We agree, next-generation mobility stocks are all about future growth, and the potential market for urban air mobility is enormous. See our take on – Why Archer Aviation Is Positioned To Become The Uber of Air Travel
But did you ever think about the downside risks? Think about it logically. There are many risks that could derail Joby’s stock growth engine, and when things go bad, such speculative stocks don’t fall – they get hammered. This isn’t just an assumption.
Historical Precedent: The 2022 Devastation
Let’s look at what happened to JOBY during the 2022 inflation shock when the Fed aggressively hiked interest rates. The stock dropped a catastrophic 79.7% from its high of $15.70 in February 2021 to $3.18 by December 2022, while the S&P 500 fell only 25.4% peak-to-trough. Think about that for a second – JOBY fell more than three times worse than the broader market. That’s the difference between speculative pre-revenue stocks and real businesses with actual cash flows and profits. Yes, the stock recovered to its pre-crisis peak by July 2025 and even pushed higher to $20.39 in August, but that recovery happened during one of the most favorable periods for risk assets. What happens when the cycle turns again?
The Risk Factors That Could Hurt JOBY
- The $500 Million Dilution Bomb: Just last week, Joby announced a $500 million share sale. This massive equity placement will significantly dilute existing shareholders. For a pre-revenue company, this is a double-edged sword – yes, it extends the runway, but it also signals that the cash burn continues and commercialization remains distant. When companies need to repeatedly tap capital markets, shareholders pay the price through ownership dilution.
- Certification Uncertainty: While Joby has made progress with the FAA, full certification for commercial operations remains uncertain. The regulatory pathway for eVTOL aircraft is unprecedented – there’s no playbook here. Any delays, additional safety requirements, or setbacks could push commercialization years into the future and require even more capital.
- Commercial Reality Gap: Even after certification, Joby faces enormous challenges: building manufacturing capacity, establishing operational infrastructure, training pilots, negotiating with municipalities for vertiport locations, and convincing customers to actually use the service at prices that make economic sense. The gap between “cool prototype” and “profitable business” is massive.
- Competition Intensification: Joby isn’t alone. Archer Aviation, Vertical Aerospace, Lilium, and others are all racing toward the same market. Meanwhile, aerospace giants like Boeing and Airbus are watching closely. The winner-take-all dynamics many investors assume may not materialize – this could become a fragmented, capital-intensive market with razor-thin margins.
- Cash Burn Reality: Aircraft development and certification requires staggering amounts of capital. Even with the recent $500 million raise, Joby will continue burning cash for years before generating meaningful revenue. Each additional capital raise dilutes shareholders further. See how Joby’s financials compare with some of the transportation and aerospace stocks.
- Market Sentiment Shifts: When risk appetite disappears – these momentum-driven, pre-revenue stocks get obliterated first. JOBY’s 2022 performance proves this.
- Technology and Safety Risks: This is aerospace. A single accident, technical failure, or safety incident could devastate the stock and set the entire industry back years. The margin for error is zero.
What’s the Real Downside Risk?
So what’s the real downside risk for JOBY stock from its current levels of $16.80?
If history is any guide, it’s a potential drop of approximately 80% or more, bringing the stock back toward the $3-4 range.
Are you prepared for it?
That’s not fear-mongering about JOBY – that’s what actually happened in 2022. The stock fell 80% from peak to trough. And the fundamental risk profile hasn’t changed dramatically. The company is still pre-revenue, still burning cash, now facing massive dilution from the $500 million equity raise, still years away from meaningful commercialization, and still trading primarily on hope and future potential rather than current business fundamentals.
The next time markets face a risk-off environment – whether from inflation, recession, geopolitical crisis, or any other shock – high-flying pre-revenue stocks typically lead the carnage. An 80% decline from current levels would take JOBY to approximately $3.36, eerily close to where it bottomed in December 2022.
If this level of risk makes you uncomfortable, you could explore the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid-, and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.
The Bottom Line
Look, the purpose of this analysis is to make investors aware of what’s the real downside risk with JOBY stock. It may or may not happen. But the risk element is surely high. The company remains pre-revenue in one of the most capital-intensive, heavily regulated industries in the world. The recent $500 million equity raise – while extending the cash runway – significantly dilutes existing shareholders and underscores that commercialization and profitability remain distant goals.
See, you’re not buying a piece of a profitable business; you’re placing a bet on eVTOL technology achieving certification, gaining public acceptance, building profitable operational scale, and Joby emerging as a winner in a market with intense competition from well-funded rivals.
It all comes down to whether you can stomach what the volatility might look like on the downside, if things don’t go as expected with Joby. An 80% drawdown isn’t theoretical – it already happened once. The question isn’t whether JOBY can fall that much again. The question is: when the next market shock arrives, are you prepared to watch your investment potentially decline by 80% or more?
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