Is It Time to Buy This Groundbreaking Electric Aviation Stock?

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We push to make flying taxis a reality, Vertical Aerospace (POSSIBLY 7.48%) develops and builds zero-emission electric vertical take-off and landing aircraft (eVTOL). The company recently unveiled a scale model of its flagship aircraft, the VX4, and plans to begin its first test flights as early as this summer.

With demand increasing, the real work of Vertical Aerospace begins now. It has to prove to the world that its technology works, is worthwhile, and most importantly, is safe.

Global presence through strategic partnerships

Led by CEO Stephen Fitzpatrick, Vertical Aerospace was founded in 2016 with the goal of developing the world’s most advanced electric aircraft. Vertical soon began working with key companies including Rolls-Royces, Microsoftand Honeywell. (All three are equity investors in the company). This gave Vertical access to global engineering teams, manufacturing capabilities, and most importantly, R&D funding.

These partnerships offer vertical aerospace advantages in the eVTOL space. For example, Honeywell Aerospace, a global pioneer in avionics, is building advanced flight control systems for Vertical’s VX4 vehicle and assisting with flight simulation testing. Other partners are Virgin Atlantic, American AirlinesAvolon and Solvay.

With a global network of partners, Vertical aspires not only to lead an entirely new flying taxi market, but also to “disrupt and crowd out” the existing helicopter market. The touted benefits of eVTOL technology over traditional helicopter flights include safety benefits, less noise and lower operating costs.

But the company hasn’t started yet

Vertical impressed tech enthusiasts and pumped up the hype when it unveiled a scale model of its prototype VX4 in July. But with real air testing taking place in the next phase, the real work for Vertical Aerospace is just beginning.

After completing a series of ground tests, Vertical will next conduct flight tests using a full-size manned aircraft. In its second-quarter letter to shareholders in early August, the company announced that it would begin flying the fully built VX4 prototype “in the coming weeks.”

While Vertical Aerospace expects flight range, performance and noise to be significant testing hurdles, the company’s biggest challenge is proving the safety of its aircraft. The certification is firmly in the crosshairs of Vertical Aerospace in the short term. The company must demonstrate to regulators that its aircraft meet the highest global aerospace safety standards.

The costs of designing, building, testing and operating aircraft – particularly advanced aircraft – are significant. For the first half of the year, Vertical reported a net operating loss of £39 million, up 79% from the same period last year. And the company expects to spend up to £50m more by the end of the year.

The demand is increasing

Vertical has generated a lot of interest in its VX4 eVTOL aircraft, with pre-orders from American Airlines, Virgin Atlantic and many others. In addition to the passenger travel business, Vertical Aerospace has also received pre-orders for use in the emergency medical services and cargo services industries.

As a result, Vertical increased its pre-order book to over 1,400 VX4 vehicles in the second quarter — a total value of $5.6 billion. American Airlines also committed to an upfront payment for its first 50 aircraft on an order that could reach 350 units. According to Fitzpatrick “[t]The outlook for eVTOLs and Vertical never looked better.”

As of June 30, Vertical had sufficient cash to continue operations for at least another 12 months. So is it time to buy Vertical Aerospace? Ultimately, this depends on risk tolerance.

While risk-averse investors may avoid such speculative startups altogether, those with a higher tolerance for risk and some patience could really make an investment in vertical aerospace a success. Keep in mind that riskier assets like these can have significantly higher volatility than blue chip stocks and also have a much higher default rate. Therefore, risk-averse investors should wait until the company’s concept is proven and its product really lives up to the hype.

As shark tank Star Kevin O’Leary once said, “Vision is nothing without a plan to execute it.” Investors with longer time horizons and an appetite for more risk could see a future where air travel is far more convenient than ever (guess Jetsons). If Vertical Aerospace can execute its plan with minimal delays, this tech stock could become a leader in the burgeoning flying taxi market.

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