JPMorgan says electric flying vehicles will be a $1 trillion market and it has a new favorite way to play it

Published Wed, Mar 1 202312:00 PM EST

There's a $1 trillion market opportunity for electric flying vehicles, and one player in particular — Eve — is positioned to take flight, according to JPMorgan. The company, which designs and produces electric vertical takeoff and landing vehicles (eVTOLs), has superior expertise since it was founded by Brazil-based jets manufacturer Embraer , analyst Marcelo Motta said in a note Wednesday. Eve went public on the New York Stock Exchange last May. Embraer holds an 89% stake in the company, he pointed out. "The company's services agreement with Embraer represents, in our view, a significant competitive advantage vs peers as it will allow Eve to leverage on Embraer's know-how and existing development infrastructure reducing its short-term Capex and Opex," wrote Mott, who initiated coverage of Eve's stock with an overweight rating. His price target of $8 suggests 46% upside from Tuesday's close. EVEX mountain 2022-05-10 Eve's performance since is May 10, 2022 IPO Eve also has the highest number of potential orders in the sector at around 2.8 billion eVTOLs, or about $8 billion in value, from clients including United Airlines, he added. In September, United announced it agreed to buy 200 electric air taxis from the company and has options to purchase 200 more. United is also investing $15 million into Eve. The nascent eVTOLs industry has the potential for major growth, according to Motta. Its total addressable market for passenger transportation could potentially reach $1 trillion by 2040 and would jump to $3 trillion when including cargo and military operations. That potential size exceeds the helicopter market of $35 billion a year and would have lower noise emission, lower operational costs and safety benefits, Motta said. That said, he's not banking on profitability for Eve in the near term. "In the short term, we expect Eve's share price to be driven by corporate events — new orders, certification milestones rather than quarterly earnings since the company should show negative bottom line and negative FCF until 2027/28," Motta said. Shares of Eve are down 24% year to date. — CNBC's Michael Bloom contributed reporting.