High-Flying Stock Soars 50%: Time to Buy or Wait for a Dip?

Key Points

• Joby Aviation is in a news-driven short-covering rally that could lead to a significant reversal for this market. 
• Good news drives the action but may not lead to a complete market reversal until later in the year. 
• Analysts and institutional support are high for this low-float stock. However, the only guarantee is volatility. 

Joby Aviation NYSE: JOBY is taking flight, but investors should wait until the next stock price dip before buying in. The recent 50% surge in stock price was driven by good news, but there has been little change in the near-term outlook. The takeaway is that Joby is improving its position, is on track to commence commercial operations next year, and is building leverage for the future. However, revenue and profits are still a long way off. Investors should only expect increased volatility now because short interest is high in this low-float stock, and insiders are selling into the rally.

Joby Surged 20% On Good News and Short-Covering

The surge in Joby's stock price is a healthy move for the market because it may shake the short sellers out. The stock price surge is driven by short-covering as much as anything else; short interest is at 10% of the share count and 20% of the float. However, the short-covering is driven by news that set Joby up to dominate the budding air taxi and regional eVTOL industry. The eVTOL industry is small today but expected to grow at a 22% CAGR to nearly $3 billion by 2034.

The first news piece came out in late April; Joby plans to expand its manufacturing facility. The expansion will double the flagship facility's output to about twenty-five vehicles annually. It will be operational next year, just in time for the commencement of commercial operations in the US. That got the stock up 25% in a matter of days. A favorable quarterly report followed that news, compounded by an acquisition, FAA approval of software systems, and a successful first-of-its-kind test flight. 

The acquisition is for Xwing. Xwing is the leader in fully autonomous air flight and has been operational since 2020. The company’s software systems enable autonomous, gate-to-gate operations; more than 250 flights and 500 landings have been completed. Joby is after the Superpilot software. It is expected to aid piloted flights today and lead to autonomous flight down the road. 

The FAA approval is for the Elevate OS software system. Elevate OS is a suite of tools, platforms, and consumer applications that support on-demand, hi-tempo air-traffic operations. It will facilitate the company's commercial operations and meshes well with the Xwing Superpilot acquisition. 

Joby Aviation Cements Leadership Position With Hydrogen-Powered Flight

The short-covering rally was kicked into overdrive when Joby announced a first-of-its-kind for the industry. That is a 523-mile eVTOL journey powered by a hydrogen fuel cell. The news is critical because hydrogen fuel cells are among the cleanest green energy technologies and result in only water as an emission. The news is also significant because Joby used an existing airframe and infrastructure to build and operate the vehicle. Perhaps as important, the flight used only 90% of the fuel capacity, setting the vehicle and company up to conduct regional flights in addition to localized air taxi service.

Analyst interest in Joby is light but bullish. MarketBeat.com tracks eight analysts whose consensus is Moderate Buy. The hydrogen-powered flight news sparked the most recent update. It came from Canter Fitzgerald, reiterating an Overweight rating and a $10 price target. The $10 price target is the highest issued by Wall Street analysts, implying a 50% upside for the stock. 

The Technical Outlook: Joby Rockets Higher, but Critical Resistance Is in Play

The price action in Joby stock is rocketing higher, gaining more than 50% since late April and 35% in July. Rising volume supports the action, which may send it higher. The risk is that significant resistance exists at the $7 level and impacts the outlook. The market could break through resistance because of the volume and strong momentum convergent with the new highs. In this scenario, a break above $7 could lead to another $2 to 40% gain in the price by the end of the year. If not, Joby shares will remain range-bound until more news is released. In that scenario, a move back to $6.50 or lower is possible.