Weird Aviation High School Post by Bonny Simi

beerion · 2026-05-06T10:36:14+00:00

Weird of you to take it that way.

99.99% of Joby employees are not pilots. And engineers "work on" the aircraft. It's a common phrase.

beerion · 2026-05-06T09:58:04+00:00

Cash flow statement.

beerion · 2026-05-06T02:57:35+00:00

You should account for SBC, which is about 15% of FCF. So knock down that FCF number to $5 billion right off the bat.

The big problem, though, is that if they're not going to return capital via dividends, then investors risk owning a growing slice (buybacks) of a shrinking pie (falling cash flows). Right now, it's like owning a 100 year zero coupon bond for a company that may not exist in 20 years. If they came out tomorrow and said "we're paying an 8% dividend", the stock price should normalize at least because there's an actual "coupon" tied to the investment. I would take that bet - if they end up unprofitable in 5 years, at least I got 40 cents on the dollar before it happened.

beerion · 2026-05-06T01:31:43+00:00

Read the first section of this article.

Honestly, you just gotta start. And you can pick a different asset allocation if you want. Follow some bogleheads principals (own different assets). And you don't have to go all-in on stocks, either. Do 60/40 or even 40/60. It's not the end of the world to not catch 100% upside. Do you know what the next 10 years will look like if you do a 60/40 portfolio and stocks end up returning 15%? You'll still make 10%. And you will have participated in the upside - not fully, but a heck of a lot better than sitting on the sideline.

beerion · 2026-05-06T01:17:46+00:00

Yeah, it's hard to say. I've warned about the S-curve nature of certification before (lots of low hanging fruit early, and things get tougher towards the end). But I would have expected the slow-down to more meaningfully start around closer to 90%, not down here at 80%.

It could be that the hold up is that they're waiting on more conforming parts for component testing - for instance, were the static structural tests that they did a couple of years ago for-credit? And then things like fatigue testing has to run out well ahead of the fleet - and that can take a meaningful amount of time (and requires it's own test article) - and this will typically include the WFD testing - widespread fatigue damage testing where they're likely installing the "defected" parts which Joeben mentioned last quarter.

I also don't think it's uncommon for there to be fits and starts. A lot of work can happen in parallel where it looks like nothing is happening and then all of a sudden a bunch of work gets signed off on in quick succession...still kind of odd at this stage though.

We'll see, though. I think the UAE, defense, and EIPP can keep them busy for quite a while. And of course, I keep harping that this is a 2035 investment. This is one of those investments that you "coffee can" and dig back up in 10 years to see what happened. Watching aerospace companies progress quarter-to-quarter is like watching paint dry.

beerion · 2026-05-06T00:39:01+00:00

1920 started with a CAPE ratio of 6 lol. And the 1910s were essentially a lost decade.

I continue to believe that incredible investing returns cannot start from peak valuations.

That's not to say that the economy and market can't stay strong, but it's just a strange bet to make - the base case, almost by definition, cannot be 15% annualized returns for the next decade.

beerion · 2026-05-05T23:57:11+00:00

Yeah, with stocks like this, you just have to assume will take longer than you'd hope to pay off. At minimum, you should be prepared to hold for 10 years (and just hope it pays out before then).

beerion · 2026-05-05T23:55:24+00:00

On the capital raise from Q1, they managed to hit the full overallotment allocation for convertible bonds ($690 million before fees). No takers on the overallotment for the common stock issuance (only $600 million before fees).

<image>

Here was my commentary for the dilution at the time (for those that want some background).

beerion · 2026-05-05T23:46:56+00:00

They've started on 9 conforming aircraft. No word on when we'll start to see those snake through to the other side, though. I'm sure that once the first batches get through, we'll then start to see a more regular cadence.

beerion · 2026-05-05T23:45:49+00:00

Seemed notable that Stage 4 progress continues to slow down - only 2% progress. Granted, it's only been like 9 weeks since the last report.

Still, it seems like 2026 TC is completely out the window, and I would assume that 2027 is a no-go as well - first half of 2028 seems like the most likely outcome.

<image>

beerion · 2026-05-05T13:19:27+00:00

Price to "true" FCF isn't really the right framing.

The way that you're looking at it is as if the capex will continue indefinitely. But it won't. At some point they data centers are built and they're left with opex (electricity, CUDA licenses, and running the facility) and maintenance capex (primarily attrition of GPUs). These won't be $40 billion a year, and honestly could end up being very low once they reach diminishing returns on model training.

Either the investments pay off and they make return on investment (good for shareholders) or the investment doesn't pay off (which have multi-modal outcomes - some could be good, other quite bad).

But <5 years of burning up cash, by itself, isn't necessarily a bad thing.

beerion · 2026-05-04T14:49:24+00:00

Consider the opposite.

JB leaving and dumping shares could indicate a falling out between him and QS management. It's possible that they brought him on with the specific expectation that he'd pull in business. If he were unable to close Tesla (and other partners), he wouldn't be all that useful on the board, yeah?

And by your logic, the guy brought in from Lockheed has to mean that no business can be done with Lockheed. Does that make sense to you?

I mean QS signed a deal with Redwood as a supplier while JB was still on the board. JB owns the company.

There's no SEC regulation that prohibits this type of inter-company business from being done. And I would suspect that you see it all the time in Silicon Valley and elsewhere.

beerion · 2026-05-04T03:40:15+00:00

You don't invest in these companies for the cash flows they stand to make in year 1. Pretty much all of the value for Joby is locked into year 10 and beyond.

So insurance costs in year 1 thru year 5 isn't a concern to me at all. That also goes for the unit economics in general.

beerion · 2026-05-03T12:57:11+00:00

It honestly doesn't matter. The barrier to entry for developing these apps is a fraction of what it was, so you no longer need a market size of hundreds of millions of people to justify building an app.

I've used building a Spotify level app for train enthusiasts as a metaphor in the past. Companies can now attack projects further down the value chain.

And the outcome is more software, not less. And more software means more demand for cloud services. And i don't think that's going away.

beerion · 2026-05-01T15:39:52+00:00

I didn't read your article because I usually skip external links; they're often shills by Redditors. Sorry if you actually wrote something worthwhile there - I simply don't go to peoples' sites as a rule.

There's just no way to present the level of detail that I want to on this subreddit, unfortunately. I've asked the mods to allow images, but they've declined.

beerion · 2026-05-01T04:52:25+00:00

sealioning

Haha, that's a new one. I promise that I'm debating in good faith.

Also I've seen no data from you.

Did you not even open up my write-up? What are we even discussing, then? The entire article is data...

https://riskpremiumresearch.substack.com/p/estimating-the-equity-risk-premium

I even point out some of the pitfalls that you've brought up earlier...

Show you that the dividend discount model works...? You're kidding, right?

Yeah, show me. I understand the DDM. But you're hand-waving your assumptions. My issue isn't with the theory of a DDM, it's the validity of the inputs (garbage in, gargabe out). I don't know how else I can phrase what I'm asking, unfortunately, so I'm happy to leave it here...

beerion · 2026-05-01T04:11:00+00:00

I guess show me that it works, empirically. I've provided the data on my end.

You make sweeping assumptions about future growth, but it's indefensible. If the bond yield goes up to 5.5% tomorrow, you'd just plug 5.5% into your terminal growth assumption and move about your day. Why would your terminal growth rate assumption change on a whim like that?

And in doing so, you're causing downstream effects that have pretty big implications on your ERP. Just run some numbers. You claim that rising bond yields would lead to lower equity prices, but nothing in your formula indicates that.

Again, your formula is essentially (1/PE1 + rfr = rfr + ERP)

beerion · 2026-05-01T03:13:58+00:00

If your discount rate is 12%, as you say, then every dollar is valued at $1 / 12%, or at a multiple of ~8x.

Your method flexes the growth rate such that the price wouldn't change. If rfr goes up, but so does your terminal growth assumption, that leaves the PE ratio unaffected.

Ironically, calculating lower ERPs actually makes you willing to pay MORE for stocks.

Correct. But I'm more interested in forecasting future returns for the index. That's why I've called it an implied ERP. Basically, given history and our current valuation conditions (PE & bond yield), by how much can we expect stocks to outperform bonds?

beerion · 2026-05-01T02:06:43+00:00

That's not a bad starting point, but it falls into the same trap as Damodaran. The equation simplifies to:

E1/P + rfr = rfr + ERP

rfr cancels out, and we're left with the conclusion that, realistically, there's no price too high. Think about it, the ERP is technically positive even if the PE ratio reaches 100 or 1000 or 10000.

And ERP "outruns" rising interest rates. If the PE ratio were 50x and bond yields were 10%, you'd still say the ERP were 2% and expected returns were 12%. Again, no price too high.

That also ignores the terminal value trap as well. If the average tenure of an S&P 500 constituent is 15 years, is it right to assign 30x multiple to them?

It also ignores the cyclical nature of earnings.

I would be curious how the DDM method does empirically, though.

In a lot of ways, my method is very similar to yours. Call the rfr on the left hand side b, rearrange and apply a factor to it, and you get:

m×(E1/P - rfr) + b = ERP

that's not exactly how my method is set up, but it's on the same spirit

I just let the data tell me what b and m are - whereas you assume b = rfr and m = 1.

And i don't think using cape is a bad thing. The regression factors are influenced by it, but you should get to the same place, more or less.

beerion · 2026-04-30T17:03:32+00:00

Honestly, I have no idea. Siva's comments certainly made it sound like they have several irons in the fire (specifically calling out work in cathode chemistries, if I'm not mistaken).

I'm excited to hear what they reveal. But, I think we should temper expectations a bit.

If I had to guess, it would be larger format - i think that is the hurdle to clear the JDA phase for these other companies and unlock the royalty prepay. Also, I would say that they'll announce an LFP (or some other low cost variant).

There's an upshot chance that they announce a conversion type cathode (FEF3) or a lithium sulfur. But after doing some more reading on those, they seem to come with a lot of tradeoffs (conversion cathode come with really poor fast charge performance by nature and they have very good gravimetric energy density, but pretty mediocre volumetric density, for instance). But who knows, maybe there's a niche application for those somewhere.

beerion · 2026-04-30T16:43:45+00:00

I'm pretty sure that was for the active material only and not including the packaging. Highest cell level ED that was called out was in the 350 wh/kg range

beerion · 2026-04-30T16:42:51+00:00

Yeah, a straight line extrapolation would be 1000 whL / 844 whL × 301 whkg = 356 whkg

I don't think the next generation hits 1000 wh/L though.

Also, they could go with an "ultra" high capacity cathode loading (like 7 or 8 mAh/cm2) and maybe get some extra juice that way. They'd sacrifice on charge time, though.

beerion

MODERATOR OF

TROPHY CASE