The market says Joby Aviation (JOBY +8.84%) is worth about $2.9 billion right now. To make a 100-bagger with this one, its market capitalization would have to reach $290 billion one day. Can this air-taxi pioneer pull it off? I'm very bullish on the company's future. But Joby is a high-risk stock. So my investment here is tiny (way under 1% of my family investment portfolio).
I'm bullish on this stock because I'm negative about self-driving cars. I don't think the collective intelligence at Alphabet or Tesla can sufficiently plan for all the variables of driving a car in the street. Even if the artificial intelligence-based technology works and reduces car collisions, every accident is a major lawsuit waiting to happen. For example, suppose Tesla manages to reduce the accident rate from 6 million a year (the total number of car accidents in 2018 in the U.S. and assuming all cars are self driven) to 1 million -- which would be incredible -- that's still 1 million lawsuits a year the company will face.
Joby, meanwhile, is changing the transportation landscape in a three-dimensional way. There's almost zero traffic in the sky. The vehicles are way faster and just as quiet. I think Joby could easily go up 10 times in value, just with human pilots. But if robots start flying those things? The sky's the limit.
Image source: Joby Aviation.
So I'm investing in Joby now, even though the company has neither earnings nor revenues yet. Why so soon? Because when you're shooting for a 100-bagger, you don't need (or want) a large initial investment. There are so many things that could go wrong, you might lose everything. But the potential upside is so high, it's worth making small investments now before the crowd wakes up and bids up the stock price.
A couple of 100-baggers will make you rich
While a 100-bagger seems impossibly big, it actually happens fairly often. For instance, if you bought shares of Apple in 2004, after the iPod but before the iPhone, you'd have made over 400 times your money by now.
Data by YCharts.
That's nothing compared to Microsoft (MSFT 1.33%) and its insane 3,000-bagger in 35 years.
Data by YCharts.
Here's a short list of some of the stocks that have pulled off the 100-bagger feat:
Amazon (NASDAQ: AMZN)
Walmart (NYSE: WMT)
Intuitive Surgical (NASDAQ: ISRG)
Netflix (NASDAQ: NFLX)
Nvidia (NASDAQ: NVDA)
Intel (NASDAQ: INTC)
Cisco Systems (NASDAQ: CSCO)
Tesla (NASDAQ: TSLA)
Nike (NYSE: NKE)
McDonald's (NYSE: MCD)
If you do the math, you'll see that even a tiny investment in a 100-bagger can make you rich. The 20-year-old college student who bought $500 worth of Microsoft back in 1986 is now a millionaire, just from that one stock buy. So that's why it's worth your time to search for companies chasing massive opportunities, and make small investments while the stock price is still tiny, and the future is uncertain.
How big is the market for air taxis?
A couple of years ago, Morgan Stanley put out a research report that estimates the market for air taxis to reach $1.5 trillion by 2040. It's not hard to see why transportation will go vertical in the future. Joby's aircraft is electric and recently demonstrated how quiet the aircraft, a critical parameter to operate in populated areas. At about 55 decibels during take-off, it's more than a thousand times quieter than a typical helicopter. And that's kind of amazing, because these vehicles are super-fast. How fast? The company's air taxi hit 205 miles an hour in a practice run earlier this year.
The company also demonstrated that the aircraft can fly 150 miles on a single battery charge. The plan is to use them to ferry passengers in and around congested cities. Los Angeles, for instance, is known for its heavy traffic. Electric cars do not fix that problem. Self-driving cars don't fix that problem, either. Nobody likes a traffic snarl, and anything that reduces those bottlenecks will be a blessing. Joby estimates the market for its air taxis in L.A. at $500 million a year. That's just one city!
Tesla in the sky?
How big is the air taxi opportunity? Well, if you don't believe Morgan Stanley's $1.5 trillion number, consider what Elon Musk has to say.
So, over time, we think full self-driving will become the most important source of profitability for Tesla. It's -- actually, if you run the numbers on robotaxis, it's kind of nutty -- it's nutty good from a financial standpoint.
That's thought-provoking. Musk is happy about his fleet of electric cars and his $53 billion in revenues. But he believes self-driving taxis is actually a much bigger opportunity in the future.
Try to imagine investing in Tesla back in 2010, when the company had its initial public offering (IPO). It was a daunting investment. Tesla had no profits and had only sold 1,000 cars in total when the company went public. If the company had suffered a few bad breaks a decade ago, it could have easily gone Chapter 11.
Joby in 2022 is much like Tesla in 2010 -- a highly risky investment opportunity with a huge potential upside. The way you approach a dangerous stock like this is by making a small investment now, and maybe adding to your position as the dangers recede and the market gets more and more excited.
Data by YCharts.
Uber in the sky?
Of course, when you think "taxis," you think Uber Technologies (UBER 1.55%), the company that disrupted the taxi industry around the world. You might think Uber would be interested in that $1.5 trillion market opportunity, too. And you'd be right. Back in 2016, Uber published a white paper about the future of urban air transportation. Two years later, the ride-sharing giant introduced its prototype vehicle. But Uber was too late to the party, and so in 2020 the company abandoned the race and sold out to Joby (and invested $75 million in the start-up).
Similarly, Toyota decided to invest almost $400 million in Joby last year. That's a major influx of cash. After several financing rounds and its SPAC last year, Joby is now sitting on $1.6 billion dollars.
So here we have a huge market opportunity. Uber sees it, and Toyota sees it. And yet these two massive companies both decided to back Joby instead of going alone. Why?
Joby has a powerful first-mover advantage. The company has been working on its aircraft for over a decade and has been collaborating with NASA since 2012. Joby's near-term goals are to get its aircraft certified by the Federal Aviation Administration (FAA), scale up its manufacturing, and launch its air taxi service in 2024. It's in the lead and likely to be first to market in the U.S.
What about self-driving air taxis?
I think Musk's vision of robotaxis in the future is very exciting. But given the congestion in the cities and the pain-points that air taxis solve, I believe this revolution may very well happen in the air first. After all, the first autopilots in aircraft were introduced in 1912! We already have drones in the air. The safety issues with a self-driving aircraft are minuscule compared to the complexities on the ground.
So that's why I've made a tiny investment in Joby Aviation now, even with a significant possibility that I might lose it all. The long-term upside is so massive, I want to have a minor ownership now, in the hopes that Joby can pull off what the company is trying to do.
