Forget Joby Aviation: This Dividend Defense Stock Is a Smarter Play on Next-Gen Air Supremacy

Valued at $12.7 billion and with more than $930 million in cash, Joby Aviation (NYSE: JOBY) is hands-down the biggest air taxi company in the world -- that isn't actually flying air taxis yet. It's twice the size of its closest competition, smaller Archer Aviation, and miles ahead of tiny Vertical Aerospace and Lilium.

However, this isn't enough to make Joby Aviation stock a buy.

Image source: Getty Images.

Get to know Joby Aviation

Joby boasts that its S4 electric-powered, vertical takeoff and landing (eVTOL) aircraft is "the most mature eVTOL aircraft" on the market. Powered by six electric motors, the plane can reach speeds of 200 miles per hour (mph) and carry a pilot and four passengers. S4 has already flown 40,000 miles during testing and has completed 3 out of 5 planned Federal Aviation Administration-defined stages for "type" certification, paving the way for commercial operations to begin.

Joby may even begin operations sooner, with the United Arab Emirates promising to permit air taxi flights in 2026 and Saudi Arabia permitting "pre-commercial evaluation flights" in H1 2026. In total, Joby says it has "more than $1 billion in potential aircraft and service sales" on the books (emphasis added).

To help make all this flying possible, Joby has announced it's doubling production capacity in the U.S. (yes, even before receiving certification to fly). The company plans to be producing four aircraft per month by 2027 -- nearly 50 planes per year. Toyota Motor is backing the project, too, committing to invest a total of $894 million in return for Joby stock.

All this said, it's worth remembering that Joby went public during the special purpose acquisition company (SPAC) initial public offering (IPO) craze back in 2021. That may raise suspicions in some investors' minds that Joby is -- for the time being, at least -- more hype than substance. And those suspicions may be justified.

After all, while Joby has some revenue to its credit, it's not a lot (yet) to support a $12.7 billion market capitalization -- just $23 million booked in the past year, and no profit at all. To the contrary, Joby's losses have increased every year it's been public, passing $1 billion over the last 12 months.

Meanwhile, analysts polled by S&P Global Market Intelligence don't expect Joby to generate positive free cash flow (FCF) before 2030, nor positive GAAP net income before 2031. With more than $530 million in negative free cash flow this year but only $930 million in the bank today, it's likely that Joby will run out of cash and need to sell more stock (diluting its shareholders in the process) before that happens -- which won't be good news for the stock price.

A better way to profit from aerospace

Want a safer bet in aerospace? Consider investing in an established aerospace giant, instead, one that's generating both profits and free cash flow already today -- and growing them: Lockheed Martin (NYSE: LMT).

The world's largest pure-play defense stock, Lockheed Martin earned $1.6 billion in profit on $18.6 billion in revenue last quarter alone. That's more than four times the revenue Joby might make in all of 2031, its first full year of profitability -- and Lockheed did it in just one quarter. Whereas analysts think Joby might generate some positive free cash flow five years from now, Lockheed Martin just finished generating $3.3 billion in real cash profit in Q3 -- money it can use to pay a fat 2.9% dividend yield. (Joby pays no dividend at all.)

Joby says it has $1 billion in "potential aircraft and service sales." That's cute. Lockheed Martin has $179 billion in real backlogged orders already on the books. That's 179 times future revenue locked in for a market cap less than 10 times Joby's.

Last but not least, Joby may be promising to build 48 planes in 2027, but Lockheed Martin has already built, delivered, and sold 220 aircraft of various types and sizes in just the first three quarters of this year: 63 helicopters, two C-130J transport aircraft, a dozen F-16s, and 143 F-35 stealth fighter jets. This is the difference between potential and reality.

The upshot for investors

Eight years ago, I made the case that Lockheed Martin deserved a place in every long-term investor's portfolio, precisely because the company's marquee franchise, the F-35, secured its future and provided it a trillion-dollar backlog of work to be done over the next 50-60 years. With Lockheed on course to deliver 190 or more F-35s alone this year and hundreds more planes on order for future years, I see no reason to change that view today.

Lockheed Martin's future is secure. Joby's is much more of a wild card. Of the two investment ideas, I much prefer the former.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Lockheed Martin. The Motley Fool has a disclosure policy.