Did ARK Bet on the Right Flying Car?

Archer Aviation, a favourite of Cathie Wood’s ARK Invest, has become a target for short sellers. Which are the other electric vertical take-off and landing (eVTOL) stocks that could benefit as the industry prepares to take flight?

• Joby Aviation has been granted exclusive rights to operate an air taxi service in Dubai.
• EHang has set the retail guidance price for its pilotless aircraft for customers in China at approximately $336,000.
• Lilium started production of its aircraft in December last year and is targeting the premium jet market in the US.

Flying taxis are getting closer to taking off.

In February, Archer Aviation [ACHR] received Part 145 certification from the US Federal Aviation Administration, which means it’s been approved to carry out maintenance on commercial aircraft.

The eVTOL company is targeting full commercialisation in 2025. In October 2023, it began test flights of its Midnight aircraft, while it also announced that it plans to launch an air taxi service across the UAE.

Archer’s bold ambitions have attracted the interest of the renowned innovation-focused fund manager Cathie Wood, who first took a position in the company in Q3 2021.

She added more Archer shares to the ARK Innovation ETF [ARKK], the ARK Autonomous Technology & Robotics ETF [ARKQ] and the ARK Space Exploration & Innovation ETF [ARKX] in February, according to Cathie’s Ark, a website that tracks all of the trades across her funds.

Notwithstanding this, Archer has become a target for sceptics.

Last August, short seller Grizzly Research claimed that the firm has been misrepresenting the readiness of its products.

Then earlier this month Edwin Dorsey, the author of the short-selling newsletter The Bear Cave, raised concerns that the company is on course for “a crash landing”, as opposed to Wood’s prediction of its share price compounding 80% over the next few years.

The Archer share price is up 99.6% in the past year through 19 March, but down 20.7% year-to-date.

All this begs the question of whether Wood has bet on the right eVTOL company.

The eVTOL industry’s total addressable market should be at least $1trn by 2040 and as much as $9trn by 2050, according to Morgan Stanley projections. Here are some other eVTOL stocks that could be ready to take flight.

Joby Aviation’s Exclusive Dubai Deal

Archer isn’t the only air mobility company that Cathie Wood has been investing in. She increased the number of shares held in Joby Aviation [JOBY] by approximately 227,000, or 7.2%, in Q4 2023, according to Stockcircle.

Data from Cathie’s Ark shows the investor added a further 213,984 shares to ARKQ in February.

Joby signed a deal with the government of Dubai in February, granting it exclusive rights to operate air taxis in the city for six years. An early-2026 launch date is being targeted.

The Joby share price is up 33% in the past year through 19 March and down 23% year-to-date.

EHang’s Autonomous Aircraft

EHang [EH] received certification from the Civil Aviation Administration of China last October to operate the EH216-S, a self-flying passenger aircraft, on commercial transportation routes in the country. The certificate was awarded on the back of 40,000 test flights.

Last month, EHang set the retail guide price for the EH216-S at RMB2.4m, or approximately $336,000, citing “market potential” and the “substantial industry scale of China’s low-altitude economy”.

The EHang share price is up 72.4% in the past year and down 7.7% year-to-date.

Vertical Aerospace’s Second Prototype Launch

Vertical Aerospace [EVTL] announced last week that it’s just a few weeks away from launching the second prototype of its VX4 aircraft. “Faster and quieter” than its predecessor, it will feature proprietary battery technology and more-advanced propellers. The first prototype crashed during a test flight last August.

In January, the British firm’s Founder and CEO Stephen Fitzpatrick committed to investing $50m to keep its eVTOL development programme running, saying that its share price doesn’t reflect the progress made.

The Vertical share price is down 42.8% in the past year and up 20.6% year-to-date.

Lilium Targets the Premium Jet Market

German eVTOL maker Lilium [LILM] started production of its Lilium Jet in December last year. This was described by the company as “a watershed moment for sustainable aviation”.

In October, the company said that its aircraft had become the first eVTOL for sale in the US after agreeing to a partnership with a full-service air brokerage and management company in Texas, which will help Lilium connect to the private jet market.

The Lilium share price is up 35.3% in the past year and down 16.3% year-to-date.

Another Way to Invest in eVTOLs

The emerging status of the eVTOL industry means the majority of the theme’s stocks aren’t held by ETFs.

The Ark Autonomous Technology & Robotics ETF [ARKQ] holds Archer and Joby. As of 31 December 2023, autonomous mobility accounts for 43.5% of the portfolio, with 14.8% allocated to advanced battery technologies. The fund is up 12.7% in the past year and down 7.8% year-to-date.

ARKX also holds Archer and Joby. As of 31 December 2023, autonomous mobility has a 40.6% weighting, while advanced battery technologies has been allocated 8.8% of the portfolio. The fund is up 8.8% in the past year and down 5.7% year-to-date.