Deutsche Bank downgrades Joby, says risks to electric aircraft stock are being overlooked

Investors may be overlooking risks in Joby Aviation, a company known for making electric aircrafts, Deutsche Bank warned. Analyst Edison Yu downgraded the stock to sell from hold. Yu also cut $2 off his price target to make it $4. His new target implies the stock could slide 11.1%.

Yu noticed that the aircraft's weight has raised concerns and caused him to wonder if it was too aggressive. Yu stated that the current design relies heavily on parts with high performance, but it is more difficult for regulators to approve them.

"Operationally, despite Joby being perceived as the leader in the industry, the developmental path of its [electric vertical takeoff and landing] aircraft seems increasingly challenging to us as we think the aircraft is dealing with weight management issues," Yu said in a Tuesday note to clients. The stock lost 3.3% in premarket trading. It's up 34.3% this year after losing 36.9% and 54.1% in 2021 and 2022, respectively.

Yu stated that Joby is currently working on an iteration its eVOTL. It's called "company conforming" and it won't get any testing credit from the Federal Aviation Administration if it has a pilot aboard. He said that there isn't much visibility into the certification and regulation process for the aircraft, with various parts at different stages.

Joby had previously moved its certification process from 2023 to 2024. Under the new timeline, commercial flights will begin in 2025. Yu noted that the company is still considered a leader in this space, despite these caveats. Yu also stated that the company has a healthy cash balance, but the highest spending burden because of its large headcount (roughly 1,400) and high integration. Michael Bloom from CNBC contributed to this report.