eVTOL And Urban Air Mobility Will Open New Routes

Key Takeaways

• Transition to electric vertical aircraft (eVTOL) promises long-term growth by enabling new routes and attracting a wider customer base.
  
• Increased aircraft ownership and strategic investments are expected to boost profitability through optimized flight economics and efficiencies.
  
• Delays in eVTOL deployment, variable Medical segment revenue, high maintenance costs, market exits, and competition threaten Blade's near-term growth and financial stability.

Catalysts

Engages in the provision of air transportation alternatives to the congested ground routes in the United States and internationally.

• Blade Air Mobility's expected transition to electric vertical aircraft (eVTOL) could lead to significant long-term revenue growth by enabling new routes and attracting a broader customer base.
  
• The strategic partnership with Skyports Infrastructure to pilot a new helicopter service in Manhattan could enhance future revenue streams and promote brand recognition and operational efficiencies.
  
• Continued emphasis on growth in Urban Air Mobility, particularly the New York City airport transfer service, which experienced high teens revenue growth, indicates potential for increased earnings.
  
• Expansion of the Medical segment, driven by new customer contracts and strategic partnerships, particularly with OrganOx, is anticipated to enhance revenue and operating margins.
  
• Increased aircraft ownership and strategic aircraft investments are likely to improve net margins and profitability through optimized flight economics and enhanced operating efficiencies.

Blade Air Mobility Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Blade Air Mobility's revenue will grow by 6.9% annually over the next 3 years.
• Analysts are not forecasting that Blade Air Mobility will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Blade Air Mobility's profit margin will increase from -11.0% to the average US Airlines industry of 6.2% in 3 years.
• If Blade Air Mobility's profit margin were to converge on the industry average, you could expect earnings to reach $18.7 million (and earnings per share of $0.22) by about May 2028, up from $-27.3 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 40.5x on those 2028 earnings, up from -7.9x today. This future PE is greater than the current PE for the US Airlines industry at 8.5x.
• Analysts expect the number of shares outstanding to grow by 3.04% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.52%, as per the Simply Wall St company report.

Blade Air Mobility Future Earnings Per Share Growth

Risks

• The timing for the deployment of eVTOL aircraft appears to be delayed, with expectations now set for late 2027 in the U.S., which could elongate the timeline for anticipated revenue from this transition and impact near-term revenue growth in the Passenger segment.
  
• The company noted variability in revenue within its Medical segment due to unpredictable factors like transplant volumes and maintenance schedules, which can cause financial instability and impact revenue and adjusted EBITDA margins.
  
• High maintenance costs for owned aircraft in the Medical segment are expected to be above average in 2025, potentially impacting net margins and cash flow during this period.
  
• Exiting certain markets, such as Canada, might impact short-term revenue growth despite efforts to improve profitability, as reducing geographic footprint could limit expansion opportunities and overall revenue potential.
  
• The company faces potential competition in high-value markets like New York City, where exclusive access to landing zones is uncertain, potentially affecting long-term revenue streams and market share in the Passenger segment.

Valuation

• The analysts have a consensus price target of $7.2 for Blade Air Mobility 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 $13.5, and the most bearish reporting a price target of just $5.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $303.8 million, earnings will come to $18.7 million, and it would be trading on a PE ratio of 40.5x, assuming you use a discount rate of 6.5%.
• Given the current share price of $2.7, the analyst price target of $7.2 is 62.5% 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.