Electric Aviation Backlog And Charging Network Expansion Will Drive Long-Term Upside

Catalysts

About BETA Technologies

BETA Technologies designs and manufactures electric aircraft, propulsion systems, and charging networks for cargo, medical, defense, and commercial aviation customers.

What are the underlying business or industry changes driving this perspective?

• Scaling deposit backed CTOL and VTOL backlogs into firm APAs, combined with a rising mix of higher quality operators and potential Republic sized orders, can convert today’s $3.5 billion aircraft backlog and $1 billion component backlog into accelerating recognized revenue and improved visibility on multi year earnings.
• Growing regulatory and policy support for electric aviation, including the powered lift advisory circular and the eVTOL integration pilot program, enables earlier than expected commercial operations that can pull forward aircraft deliveries, increase utilization of the fleet, and drive faster ramp in service revenue and margins.
• Expansion of BETA’s interoperable, multimodal charging network across the U.S. and into international hubs such as Abu Dhabi airports positions the company as the energy gateway for electric aviation, supporting recurring high margin charging and infrastructure services that can structurally lift net margins as utilization scales.
• Deepening partnerships with GE Aerospace, Embraer Eve, General Dynamics and allied defense customers validate BETA’s propulsion and hybrid systems as a reference platform, opening additional high value aerospace and defense programs that can create upside to the current $29 million to $33 million revenue outlook and accelerate EBITDA leverage.
• Long duration aftermarket economics from annually refreshed batteries and power by the hour agreements, including for Eve’s H500B motors and BETA’s own aircraft, can turn each $4 million to $4.5 million sale into roughly $13 million of lifetime aftermarket revenue, supporting durable, compounding gross profit and a path to positive earnings as the installed base grows over the next two decades.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming BETA Technologies's revenue will grow by 205.8% annually over the next 3 years.
• Analysts are not forecasting that BETA Technologies will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate BETA Technologies's profit margin will increase from -2497.2% to the average US Aerospace & Defense industry of 8.4% in 3 years.
• If BETA Technologies's profit margin were to converge on the industry average, you could expect earnings to reach $69.3 million (and earnings per share of $1.47) by about December 2028, up from $-722.2 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 32.1x on those 2028 earnings, up from -9.0x today. This future PE is lower than the current PE for the US Aerospace & Defense industry at 37.9x.
• Analysts expect the number of shares outstanding to grow by 0.89% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.58%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Electric aviation remains heavily dependent on emerging FAA frameworks and programs such as powered lift certification and the eVTOL integration pilot program. Any delay or shift in regulatory or political priorities could push out commercial entry into service, slowing the conversion of BETA Technologies's multibillion dollar backlog into recognized revenue and earnings.
• The long runway to profitability, highlighted by negative adjusted EBITDA of $200.7 million year to date and guidance of up to negative $325 million for 2025, means that any stall in access to capital markets or deterioration in investor appetite for high cash burn aerospace ventures could force cuts to R&D and industrialization. This could impair long term revenue growth and net margins.
• The business model leans on large, concentrated counterparties in aerospace, defense and logistics, including GE Aerospace, Embraer Eve, General Dynamics and major regional airlines. Setbacks in partner programs, competitive propulsion offerings or changes in fleet strategy could shrink the component and aircraft demand pipeline and reduce expected high margin aftermarket earnings.
• BETA Technologies is betting on large scale electric and hybrid fleet adoption across cargo, regional, military and marine applications. If long term secular trends in battery technology, power density or charging infrastructure fall short of expectations, customers may limit utilization or defer fleet replacement, which could pressure utilization driven service revenue and structurally higher net margins.
• The strategy of deep vertical integration and capacity for up to 300 aircraft per year requires flawless scaling of supply chain, labor and production economics. If learning curve and cost reductions in areas like composites, batteries and power electronics do not offset fixed overhead, unit economics may remain unattractive, weighing on gross margins and delaying positive earnings.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of $37.88 for BETA Technologies based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $47.0, and the most bearish reporting a price target of just $30.0.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be $827.3 million, earnings will come to $69.3 million, and it would be trading on a PE ratio of 32.1x, assuming you use a discount rate of 7.6%.
  
• Given the current share price of $28.39, the analyst price target of $37.88 is 25.0% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.