Home Deep Analysis Eve Stock: Disruptive eVTOL Technology with Growth Potential (NYSE: EVEX)

Eve Stock: Disruptive eVTOL Technology with Growth Potential (NYSE: EVEX)

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Eve Stock: Disruptive eVTOL Technology with Growth Potential (NYSE: EVEX)

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At the Farnborough International Airshow, we had legacy manufacturers showcasing their orders and preliminary agreements. These manufacturers include Boeing (BA), Airbus (OTCPK:EADSF) (OTCPK:EADSY), ATR and Embraer (ERJ)) and order announcements for their popular turboprops and single-aisle aircraft. However, disruptive technologies are also entering the market space in the form of electric vertical take-off and landing (eVTOL) vehicles, aiming to revolutionize urban air mobility and potentially provide disruptive technologies in other areas. One of the eVTOL players who made the announcement during the Farnborough Airshow was Eve (NYSE: EVEX). In this report, I will look at how disruptive technologies stack up with current technology solutions in terms of value, and focus on their applications.

Disruptive technology, but can’t compete with Boeing or Airbus

Eve renders eVTOL in flight

Eve eVTOL rendering in flight (eve)

The simplest thing we can say about eVTOLs is that like any Boeing 737 or Airbus A320, eVTOLs can fly, but that’s what they all have in common. eVTOL is essentially a competition with helicopters, which offer products designed for urban air mobility with a different mindset. Helicopter taxis or shared vehicle services do exist, but helicopters are relatively complex and involve acquisition and operating costs, making them less suitable for large-scale applications and transportation.

Designed for urban air mobility, eVTOL is designed to relieve congestion in urban areas, but can also provide mobility solutions in less developed areas. To truly play a meaningful role in tackling congestion, eVTOLs must be inexpensive to operate, so unlike helicopters, they are built with new technologies to reduce acquisition, operating costs, increase flexibility and reduce environmental footprints. Just for comparison purposes, the eVTOL sells for around $3 million, while the helicopters Airbus sells during the air show sell for $5 million to $10 million. That’s not to say all eVTOLs will be immediate. Conversely, while the technology and applications are promising, most eVTOL manufacturers are unlikely to achieve this in the long term, as competition will be fierce and market penetration will take time. Not all companies will have the time and money.

Eve: an attractive relative position

Eve renders eVTOL

Eve renders eVTOL (eve)

One of the companies that has some traction in the eVTOL space is Eve. The company was spun out from Embraer’s innovation arm, which might actually serve the company well. An aeronautical engineering background is a must to design and manufacture an eVTOL, but having an extensive network from Embraer, the Brazilian jet maker’s equipment manufacturer knowledge and footprint would certainly benefit Eve.

This is also what we saw at the Farnborough International Airshow, where BAE Systems (OTCPK:BAESF) (OTCPK:BAESY) and Eve signed a letter of intent for 150 eVTOLs. At the same time, this demonstrates the interest in applying urban air mobility solutions in the defense market, which may further increase the market potential of eVTOL. The interim agreement was signed by Eve, Embraer and BAE Systems, while a separate memorandum of understanding will allow Embraer and BAE Systems to develop defense-focused eVTOLs using Eve’s vehicles as a base.

At this point, we do see eVTOL companies at the airshow, so it will be interesting to see what they actually bring to the airshow in terms of protocols. Our TAF Airshow Order Tracker, which we use to track and visualize order announcements, shows announcements for more than 600 aircraft worth nearly $24 billion. In another report, we’ll break down this announcement process in detail, but for now I’d like to see Eve’s share of that process. If we look at the tentative agreement, we count the announcement covering 200 aircraft, worth $1.9 billion. The preliminary agreement between BAE Systems and Eve for 150 eVTOLs covers 150 of the 200 aircraft or 75%, or 21% of the total value. So obviously eVTOL has a smaller share in terms of value, but that only makes sense from a product and application perspective.

in conclusion

With this report, I certainly don’t want to flag Eve or any eVTOL company as a buy. Instead, I’d like to point out how air mobility has evolved and the changes we’ve seen during the airshow. We no longer focus on orders from small ATR turboprops all the way to Boeing’s announced orders for the larger Boeing 777-8F freighter, but there is a separate market with its own dynamics that aims to solve a completely different problem. If successful, we may see urban air mobility deals become a routine part of the order flow for future airshows. So, I would say, watch the eVTOL market during and outside of the airshow. It’s a market that’s not for all investors, but it’s certainly worth watching.

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