I had one of those “you know you’re an investor when” moments recently. I was traveling from a regional airport to a major hub. It’s a flight that lasts about 20 minutes, and I thought it would be a great application for a flying car, or electric vertical take-off and landing vehicle (eVTOL). Having written about the sector recently, it brought to mind a list of flying car stocks to buy.
These short “puddle jumper” flights are one of the potential applications for eVTOLs, a market that Forbes Business Insights expects to grow at a compound annual growth rate (CAGR) of 58.1% through 2040. At that rate, the flying car market would be valued at over $1.53 billion.
This is an industry that could provide a key solution to issues such as traffic congestion and climate change. However, it’s also a sector in its infancy. Safety and regulatory concerns abound that even the most bullish investors shouldn’t ignore.
One of the most well-known names that investors are excited about is Joby Aviation (NYSE:JOBY). It is the furthest down the path of receiving Federal Aviation Administration (FAA) approval. Still, with two paths left to complete and little revenue coming in the door, even JOBY holds some risk despite a market cap of over $3 billion.
This is an extremely speculative sector that will require patience. But if you trust analyst sentiment, and if your portfolio can handle stocks with that profile, there are several flying car stocks to buy.
Archer Aviation (ACHR)
Investors in the electric vehicle (EV) space know that building a new mousetrap is capital intensive. The same is true for the eVTOL sector which also faces safety and regulatory hurdles. As mentioned above, Joby Aviation is furthest down the path to FAA certification. However, Archer Aviation (NYSE:ACHR) may not be that far behind.
In February 2024, Archer met two important milestones that eVTOL makers must meet before the FAA certification process can begin. Even better, the company’s flagship vehicle, the Midnight EVTOL, easily passed the FAA’s Phase 1 testing.
The company is already accepting preorders and preparing infrastructure in New York and Los Angeles. In other words, the groundwork is being laid.
Archer has a market cap of $1.37 billion as of the market close on March 1, 2024. ACHR stock has dropped about 7% in the last month, but analysts are still bullish on the stock. The consensus price target of $9.36 is 111% above the current price.
Eve Holding (EVEX)
Eve Holding (NYSE:EVEX) is the eVTOL project backed by airline manufacturer, Embraer. That’s one key difference between Eve Holding and other eVTOL makers.
Another, and likely because it’s the brainchild of an airline manufacturer, the company is emphasizing the opportunities this sector could open up for consumers – much like the example I provided in the introduction.
The key reason that investors may want to stay away from Eve Holdings is that it won’t be operational until at least 2026. Joby Aviation and Archer by contrast are still on track to begin operations in 2025.
But a counterargument could well be that in a growing sector, the pie will only get bigger. Therefore, it’s tough to know how big Joby’s first-mover advantage will be. Especially when Eve Holding is backed by a company that has a history of navigating FAA regulations.
Analysts seem to be buying this argument. EVEX stock has a $9.50 price target which is 74% higher than its current price. And four out of seven analysts give the stock a strong buy rating.
Vertical Aerospace (EVTL)
Vertical Aerospace (NYSE:EVTL) is the long-shot on this list of flying car stocks to buy. The company is a small-cap company with a market cap of just $152.63 million. The company has a prototype that is in the certification process. Unfortunately, it also had a crash that has delayed its final certification into 2026.
But like Eve Holdings, that may not be a fatal blow for the company. A more pressing concern is the company’s capitalization. In December, the company made a fixed-shelf filing to raise up to $180 million in cash.
This brings into play two issues. First, the company needs to take the action in addition to an almost certain reverse stock split to remain in compliance with Nasdaq requirements. The second is that given the company’s market cap, a $180 million offering would cut shareholder value by more than 50%.
However, the company has the backing of several big-name investors. This may be a trade now, but one for investors to keep an eye on for later.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.