The Flying Car Moment is Now Months Away | LFTC
Audio Brief
Show transcript
This episode features Charles Lemonides of ValueWorks discussing his investment thesis for Joby Aviation and the evolving eVTOL industry.
There are three key takeaways from this conversation. First, Joby Aviation demonstrates a significant lead in the eVTOL space through proven flight technology. Second, its operational business model offers superior long-term potential compared to pure manufacturing. Third, Joby represents a 'conceptual value' opportunity, trading at a discount to its invested capital.
Joby’s live, piloted flights at the Dubai Air Show distinguish it from competitors, who primarily displayed models. This demonstration of real-world functionality significantly de-risks the technological aspect of the investment. The company's aircraft is notably quieter than traditional helicopters, making it more suitable for urban air mobility, and features six rotors for redundancy along with gliding capability for enhanced safety.
Joby’s strategy extends beyond selling aircraft; it aims to operate its own air taxi service. This creates a recurring revenue stream tied to flights rather than one-time sales. This operational model offers a much larger total addressable market and differentiates Joby by building an ecosystem, as evidenced by its acquisition of Blade's infrastructure.
Lemonides applies a 'conceptual value' lens, viewing Joby as a quality asset with a compelling valuation despite being pre-revenue. This approach values the company based on the substantial capital already invested in its technology and infrastructure. When the market price trades at a discount to this invested capital, it presents an attractive risk-reward profile for long-term investors.
This analysis suggests Joby Aviation offers a unique investment proposition based on its technological leadership, strategic business model, and overlooked conceptual value.
Episode Overview
- Charles Lemonides, founder of the hedge fund ValueWorks, joins Josh Brown to discuss his investment thesis for Joby Aviation (JOBY) and the broader eVTOL (electric vertical take-off and landing) industry.
- Lemonides, who recently attended the Dubai Air Show, explains why Joby stands out from its competitors, highlighting its successful live, piloted flights as a major de-risking event for the company.
- The conversation covers the key differences between eVTOL aircraft and traditional helicopters, including noise levels, safety features (redundancy, gliding capability), and operational efficiency.
- Lemonides outlines his "conceptual value" approach, explaining how a seemingly speculative growth stock like Joby can be viewed as a value investment when considering the capital already invested versus its current valuation.
Key Concepts
- Dubai Air Show as a Proving Ground: The event was a significant showcase for the eVTOL industry. Joby distinguished itself as the only company to conduct live, piloted demonstration flights, including a historic point-to-point air taxi flight, proving its technology is far more advanced than competitors who only displayed models.
- eVTOL vs. Helicopter: Joby's aircraft offers significant advantages over traditional helicopters. It is substantially quieter (a "buzz" vs. a "whomp"), which is critical for public acceptance in urban areas. It also features six rotors for redundancy and a fixed wing that allows it to glide, making it inherently safer.
- Business Model: Operator vs. Manufacturer: Joby's strategy is not just to sell aircraft but to operate its own air taxi service. This is a key differentiator, as it creates a recurring revenue model based on flights rather than a one-time sales model. The acquisition of Blade's infrastructure is a step toward building out this operational capability.
- Conceptual Value Investing: Lemonides' investment approach involves identifying quality assets at compelling valuations. For a pre-revenue company like Joby, this means valuing it based on the significant capital already invested in R&D and infrastructure, especially when the market price offers a discount to that invested capital.
Quotes
- At 01:07 - "We both are very excited about one particular eVTOL stock, and that is Joby." - Host Josh Brown sets the stage for the deep dive into Joby Aviation, highlighting a shared interest with his guest.
- At 03:33 - "But you're right, there was only one that actually flew their flying machine... and is much further along than everybody else." - Charles Lemonides explains Joby's significant lead over competitors at the Dubai Air Show, where others only showed static models.
- At 04:50 - "This thing makes no noise. And that's going to change people's willingness to have it showing up in their neighborhoods." - Charles emphasizes the quiet nature of Joby's eVTOL as a game-changing advantage for gaining regulatory and public approval for urban air mobility.
- At 12:28 - "But if you're operating 200 and you're making $5 million of revenues on that operating 200, and the next year you're operating 400, then your revenues have just doubled." - Lemonides explains the powerful, scalable recurring revenue model of operating an air taxi fleet, which he sees as more valuable than simply selling the aircraft.
- At 26:23 - "Our tagline is 'quality assets, compelling valuations.'" - Charles Lemonides defines his firm's investment philosophy, moving beyond traditional value investing to find growth opportunities that are mispriced by the market.
Takeaways
- Invest in the Leader with Proven Technology: In emerging, capital-intensive industries like eVTOL, the company that can demonstrate a working, certified product first has a massive advantage. Joby's live flights are a powerful signal that they are the current leader, de-risking the technological aspect of the investment.
- Understand the Business Model's Long-Term Potential: The most significant value may not come from manufacturing, but from operations. A company that builds and operates its own fleet (like an airline or ride-sharing service) has a much larger total addressable market and potential for recurring revenue than one that only sells the hardware.
- Look for Value in "Broken" Growth Stories: A compelling value opportunity can arise when the market loses patience with a growth company that has already made significant capital investments. Buying into such a company at a discount to the capital already spent to build its technology and infrastructure can offer an attractive risk/reward profile.
