Bullish indicating open at $55-$60, IPO prices at $37
On Friday, Canaccord Genuity adjusted its financial outlook for Vertical Aerospace Ltd. (NYSE: EVTL), reducing the company's price target from $1.75 to $1.50, while still endorsing the stock with a Buy rating. The modification comes amidst uncertainties regarding the second tranche of an equity investment. The firm highlighted that Vertical Aerospace reported a cash balance of approximately $84 million at the end of June 2024, credited to an electric powertrain reimbursement from Rolls-Royce (OTC:RYCEY).
The analyst from Canaccord Genuity expressed confidence that the existing funds should adequately support the company's operations until at least the end of the fourth quarter of 2024. This provides CEO Stephen Fitzpatrick and his team with a cushion before the second legally binding payment becomes a pressing concern.
The analyst's financial model already factors in the dilutive effect of a projected capital raise of around £340 million, which management has indicated is planned for the near future.
Moreover, Canaccord Genuity has updated its valuation model for Vertical Aerospace. This revision includes the assumption of additional equity from a forthcoming capital raise. Moreover, the firm has incorporated a higher risk premium into the discount rate used for their valuation to reflect the increased uncertainty.
The report from Canaccord Genuity did not change its optimistic Buy rating on Vertical Aerospace, suggesting that the firm still sees potential value in the company's shares despite the lowered price target. The analyst's commentary indicates a belief in the company's ability to navigate its current financial situation and move forward with its business plans.
Vertical Aerospace has been actively testing its advanced electric Vertical Take-Off and Landing (eVTOL) aircraft, the VX4. The company recently completed initial powered ground tests and is now moving to the next phase which involves powered tests of the VX4's propulsion system. The VX4 prototype boasts a 20% improvement in power-to-weight ratio over its predecessor and could potentially reach cruise speeds of up to 150mph.
Furthermore, Vertical Aerospace's Design Organisation Approval (DOA) has been extended by the UK Civil Aviation Authority (CAA), enabling the company's engineers to oversee a broader range of technical compliance areas. The company is also set to work with the CAA to further extend its DOA privileges.
On the financial front, Canaccord Genuity has maintained a Buy rating on Vertical Aerospace, highlighting the company's robust engineering capabilities and substantial order backlog. The firm also noted that Vertical Aerospace has secured 1,500 pre-orders for the VX4, valued at approximately $6 billion.
InvestingPro Insights
Vertical Aerospace Ltd. (NYSE: EVTL) has been navigating a challenging financial environment, as reflected by real-time data from InvestingPro. With a market capitalization of $189.17 million and a negative P/E ratio of -2.11, the company's financial metrics underscore the concerns raised by Canaccord Genuity. The company's recent cash burn rate and weak gross profit margins corroborate the analyst's cautionary stance.
Despite these challenges, Vertical Aerospace has shown resilience with a significant return of 8.52% over the last week, suggesting a potential rebound in investor confidence. The company's stock performance over the last three months, with an 18.75% return, further indicates that there may be underlying value recognized by the market. These InvestingPro Tips highlight the company's ability to generate positive short-term returns even as it grapples with profitability issues.
Investors considering Vertical Aerospace's stock should note that while the company has not been profitable over the last twelve months and analysts do not anticipate profitability this year, its liquid assets do exceed short-term obligations. This aligns with the Canaccord Genuity's assessment that current funds should sustain operations into late 2024. For more comprehensive analysis and additional InvestingPro Tips, interested parties can visit InvestingPro's dedicated page for Vertical Aerospace at https://www.investing.com/pro/EVTL, where over ten additional tips are available.
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