Time for a Pre-ER assessment! Market’s going down but eVTOL only go straight up (and then transition to level flight). Well maybe not but…
Note: much of this was written before PM started today which reversed many of the Friday EOD gains on eVTOL stocks, but at low volumes this morning. Still, the absolutely massive selloff is obviously going to make the market forces described here extremely significant.… Avoiding very short term calls and adjusting strike prices to reality of the sell off is advised.
BLUF: Craps real volatile and red, but EOD Friday, three eVTOL stocks showed big strength (note: as of premarket these gains have been reversed again). There’s still significant upside potential if the market runs from the red into “hopeful big future gains” stocks. That said, we may be looking at a delay until October before we get the next round of big pops as macroeconomic forces crush speculative and risky sectors first. Investors previously ready to buy in may hold off as cash flees the market for a bit.
If you want to play ERs here, I’d recommend an 8/9 put & 8/16 call strangle on ACHR/JOBY paying less for the immediate possibility of a tank during the ER (announce dilution, macro forces tanking the whole market) (Note: may have needed to get in on that Friday, 4p are about as low as you can reasonably go on ACHR, for example) while allowing a longer timeframe for the market to get it together and a delayed bounce from good ERs or positive follow-up after the ER.
Thesis Summary: eVTOL companies announcing on-schedule movement towards revenue generation in 2025/2026 will create major hype spikes in the share price. Conversely, setbacks will cause prices to fall violently. This will be of particular note from now until EOY, and again starting Spring 2025.
Recap to date (since initiating coverage July 7th): While major market downturns have slaughtered prices over the last week especially, evidence in support of my thesis include the two major spikes on 7/10 and 7/11 for JOBY and ACHR, respectively. Each of these spikes created multi-bag wins on my recommended plays from 7/7. I erred in not being more cautious after these initial spikes. Moving immediately to a post-er (8/16) strangle on each company after their major spikes would have been significantly safer.
Earnings Discussions
Different format here, returning to look at the sector as a whole mainly, before mentions of specific companies. Monday price action on the market as a whole and on sector-wide tickers is going to be informative (i.e. if we’re “really crashing” or we get a bounce)
Sector Bull Indicators
- eVTOL should be a little less connected to “current” market forces as its valuation is future-speculative. Its possible investors who see that downside is somewhat hard-capped by the low share price, and long-run viable, will park cash in promising tech hoping for a major rebound on the next rip upwards. Several companies (ACHR, Vertical, LILM) had major upswings Friday EOD amid the sea of red.
- The sector has come off major airshows, Olympic mentions, and a slew of deals over the last quarter that have not really gotten market response since early July. ERs across the board are probably going to consolidate all the good news into a slick package, hopefully prompting a big response.
- No bad news all quarter. FAA & EASA have announced work on joint standards. Nobody has moved to block or diminish eVTOL specifically.
- On a longer timeframe, the lack of response to several major announcements combined with the downturn could mean the sector is “loaded” for a future run (October expiry options) that hasn’t been priced in due to risk reducing value, and will shoot up as markets stabilize and geopolitical risk diminishes.
Sector Bear Indicators
- Well, uh, the market has been crashing. Converse to the above, large-scale forces causing risk to grow around everything means speculative technology gets abandoned first. Institutions will hold as-is until a firm bull market takes hold again.
- Muted reactions to good news may mean dilution risk across the sector is still a major suppressant. Several are known to be diluting (EVEX, Vertical), and ACHR is at major risk of needing capital raised as well.
Top 5 eVTOL Analysis
ACHR: Archer Aviation
Bull Case: On schedule for everything, big pop in early July. They’ve had great news all quarter and, in particular, their manufacturing plant is the largest and most advanced in the immediate sector. Direct investment from Stellantis may solve cash flow and prevent further dilution.
Bear Case: Certification timeline is aggressive and any delay puts the whole plan in Jeopardy. Cash position is still weak and they may announce dilution plans this quarter.
Analysis: Bullish ticker, but macro level forces may dampen Especially after the reversion to 4, and the big pump EOD Friday during a huge downturn, I see more upside than downside at a ticker level. Currently, Archer seems like it will in fact turn into “a real company.” Still optimistic that we see 6+ by 8/16.
JOBY: Joby Aviation
Bull Case: had a massive test flight success in July that sent them soaring. The reversion seems macro-based as their cash position is exceptional and no bad news has been announced. They’ve been VERY quiet since then and that may be because they are saving their ammunition for their ER.
Bear Case: Conversely, the “very quiet” part might be because they just don’t have anything to announce. They have a solid but not entirely impressive order book, and at one of the highest valuations in the sector, they need to go from “best tech demo” to “real operations” pretty dang quick. Their manufacturing process is also considerably more bespoke, so certification may take longer.
Analysis: Dipped too far, 10/16 6c should be cheap JOBY didn’t get a Friday EOD bump with the rest of the major sector players. I’m not sure what the ER will bring, but October-dated calls bought when the price is low will almost definitely hit. Hits for 8/9 and 8/16 calls are risky as the silence has been defeaning.
EVTL: Vertical Aerospace
Bull Case: began their test flights on their new prototype. If they continue to aggressively move forward they should sustain above 1 and push for a ‘real’ valuation. That valuation should be quite high as well, because their order book is very strong.
Bear Case: Dilution plans are announcing in September. If the price stays above 1 it’ll probably be less significant, as the need to reverse-split will be eliminated. Feels like sell-offs are being designed to keep it below 1. In any case, dilution will occur so risk of that is 100%. It’s a target-2026 company so investors have tons of time to bother even looking at the company.
Analysis: Shares are ‘safe’ but long term. I initially recommended a higher sell point. With dilution approaching and no major pop on first tethered flights, the 50% upside of a big pop is still a substantial return without being outrageous. Jan 2025 2.5c acquired at .05 each and targeted to sell on a breakout before dilution catches up to it… might still be okay.
BLDE: Blade Air Mobility
An “end user” company… I haven’t covered much, but they have advanced orders to receive Beta’s eVTOL frames by 2025.
Bull Case They have aggressively increased marketing, including deals with Marriott, and are in the process of a buyback. They should be positioning to be one of the first flying eVTOL over NYC to major hotel and entertainment venues.
Bear Case: Still a comparatively small company with a tiny niche hoping to expand. While they have real current operations, they seem to be hanging their hat on future plans to get much hype.
Analysis: Short Strangle and Shares? 5.00 is a huge gap up by 8/16 and the only option strike other than 2.5. A short strangle (selling 5c and 2.5p) might be the best play here.
EVEX: Eve Holding
Bull Case: Very strong order book and technology, backed by Embraer (which itself has increased value significantly).
Bear Case: Biiiig dilutions. Weird for a corporate backed to dilute in this manner. Also, it’s a target-2026 company so people might stay out while playing 2025 companies instead this year.
Analysis: Dilution is too risky at the moment Another possible Iron Condor/Short Strangle here. Alternatively, keep buying very long dated 2.5c and riding price increases. Probably not a viable strategy during an overall market downturn, however.