The electric vertical take-off and landing (eVTOL) industry is in its early growth stages, but a few stocks are already soaring on the hype surrounding it. Archer Aviation (NYSE: ACHR) and Joby Aviation (NYSE: JOBY) are both up around 330% since the start of 2023.
Neither of these companies has commenced commercial air taxi operations just yet, and both come with risks. If you’re bullish on eVTOLs, which stock should you consider buying in 2026?
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Archer and Joby have been making progress on certifying their eVTOLs so that they can function as air taxis. It’s a lengthy process with the Federal Aviation Administration (FAA), but both companies have been moving in the right direction and advancing in their certification efforts.
Certification is expected to take place soon, and the hope is that both eVTOLs will be operational next year. The first market could end up being outside of North America, however, as both companies have been testing their respective aircraft in the United Arab Emirates, where approval may end up coming quicker than in the U.S.
While many investors believe Joby has a slight edge and may be the first to begin its air taxi operations, the reality is that Archer may not be too far behind.
Since the eVTOL industry is in its infancy, there are going to be considerable question marks ahead for both of these businesses, including just how much demand there will be for air taxi services, how profitable they might be, and how difficult it will be to scale the operations. These are risks that are common to all eVTOL stocks and are not specific to Archer or Joby, but they highlight some of the uncertainty ahead.
It’s important to consider these risks as both companies may be mired in losses for the foreseeable future. The good news for Joby is that it is at least generating some revenue from Blade Air Mobility; it acquired its passenger business earlier in the year. Blade primarily transports passengers via helicopter, and for the period ending Sept. 30, it helped Joby generate $22.6 million in sales.
Investors, however, are eager to see how well the eVTOL business will be, not helicopters. And so while Joby is generating some revenue these days (Archer isn’t), what growth investors will ultimately be looking for is how strong the eVTOL business will be. And for both Archer and Joby, that’s still a big unknown.
There are many similarities between these two stocks, and also one glaring difference: valuation. Joby’s market cap is $13.2 billion, which is more than double Archer’s worth right now — $5.9 billion. While Archer’s stock has fallen 18% this year, shares of Joby have soared 78%.
One reason for the discrepancy can be attributed to a higher short interest in Archer, with a greater proportion of investors betting against the company. Archer has been hit with multiple short reports this year, questioning the progress the business has truly been making, and that could be a key reason investors are a bit more bearish on Archer than they have been on Joby. Investors, however, should remember to take these reports with a grain of salt, as short sellers often have financial incentives for the stock they are targeting to underperform, and their reports can be biased.
Investing in eVTOL stocks is risky because of all the uncertainty ahead for the industry. And if you’re a risk-averse investor, you may simply want to avoid any eVTOL stocks. But if you’re OK with the risk and are picking between Archer and Joby, I’d suggest going with Archer stock today.
Although Archer has been the target of short reports this year, I don’t think that Joby is worth more than double the value. By going with Archer, you can potentially reduce the downside risk as its more modest valuation can provide you with a greater margin of safety, which can be crucial when investing in risky eVTOL stocks to begin with.
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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