Joby Aviation (JOBY -0.30%) has disappointed a lot of investors since its public debut. The developer of electric vertical takeoff and landing (eVTOL) aircraft went public by merging with a special purpose acquisition company (SPAC) on Aug. 10, 2021. The combined company's stock opened at $10.62 on the first day.

But as of this writing, Joby's stock only trades at about $6. Its stock fizzled out as it missed its own pre-merger targets, barely generated any revenue, and racked up steep losses. Rising interest rates exacerbated that pressure by driving investors away from speculative SPAC-backed companies. So, should investors still buy Joby's unloved stock as a contrarian play today?

Image source: Joby Aviation.

An early mover in a nascent market

The eVTOL aircraft market is a nascent one. However, early movers like Joby and rival Archer Aviation (ACHR -0.53%) expect their drone-like aircraft to become cheaper, greener, and easier-to-land alternatives than traditional helicopters.

Joby's first aircraft, the S4, can carry a single pilot and four passengers, travel for 100 miles on a single charge, and reach a maximum speed of 200 mph. It's also developing a hydrogen-powered hybrid version that can be charged more quickly and travel five times farther on a single charge than its current aircraft.

Joby is backed by big investors and customers like Toyota (TM 1.42%) and Delta Air Lines (DAL -3.06%). It currently holds a $131 million contract with the U.S. Department of Defense (DOD) to deliver up to nine eVTOL aircraft to the U.S. Air Force (USAF) over the next few years. Its aircraft will initially be used for short-range air taxi services.

Joby is gradually expanding its business

Joby has delivered two S4s to Edwards Air Force Base (AFB) so far. The first arrived in the third quarter of 2023, while the second arrived in the fourth quarter of 2024. It plans to deliver another two aircraft to MacDill AFB this year.

Joby operates five aircraft in its test fleet, including one hydrogen-hybrid aircraft. It plans to commence its Type Inspection Authorization (TIA) flight tests, which are required to certify its aircraft for commercial passenger flights in the U.S., within the next 12 months. If the Federal Aviation Administration (FAA) approves its flights, Delta will partner with Uber Technologies (UBER 1.75%) and deploy Joby's S4 aircraft for its first air taxi services in New York and Los Angeles within the next few years.

Joby is also making significant progress overseas. It plans to deliver its first aircraft to Dubai by mid-2025 and start carrying its first passengers in late 2025 or early 2026. It's also completed several successful test flights in South Korea and Japan.

Throughout 2024, Joby attracted more than $1 billion in additional funding and commitments, including a fresh $500 million commitment from Toyota in the fourth quarter. That support should prevent Joby, which ended 2024 with $933 million in cash and equivalents, from going bankrupt as it tries to ramp up its production and deliveries.

But it's still richly valued and bleeding red ink

Joby has a promising future, but a lot of growth is already baked into its valuations. With an enterprise value of $4.7 billion, it's valued at 522 times this year's sales, 57 times its 2026 sales, and 22 times its 2027 sales. By comparison, Archer Aviation has an enterprise value of $3.6 billion and trades at just 8 times its 2027 sales.

That might explain why Joby's insiders sold more than twice as many shares as they bought over the past 12 months. Archer's insiders bought 12 times as many shares as they sold during the same period.

Joby and Archer are both expected to remain unprofitable for at least the next few years, and both companies are constantly diluting their investors with secondary offerings and high stock-based compensation expenses. Over the past three years, Joby's share count rose 30%, while Archer's surged 127%.

Is it the right time to buy Joby's stock?

Joby's business could keep expanding over the next few years, but it's too richly valued. If I wanted to invest in the fledgling eVTOL market, I'd probably pick Archer instead of Joby. Archer is cheaper and firmly backed by United Airlines, Stellantis, the DOD, and other big customers and partners.