By Brian Lantier, CFA
NASDAQ:HOVR
READ THE FULL HOVR RESEARCH REPORT
New Horizon Aircraft (referred to as "Horizon Aircraft" or "Horizon") (NASDAQ:HOVR) has announced several positive developments over the past two months, including agreements focused on the design of the Cavorite X7 eVTOL, securing partnerships for key components, and exploring the prospect of launching a regional hydrogen-electric VTOL vehicle.
Since our initiation in May, the company has announced:
- a partnership with MT-Propeller to supply propellers for Horizon's hybrid turbine engine
- a collaboration with designer Andrea Mocellin to work on the design of the Cavorite X7 and
- a plan to work with ZeroAvia to develop a hydrogen-electric VTOL for regional markets.
We view all the news flow from Horizon as being incrementally important; however, we believe the ZeroAvia collaboration has the potential to be the most significant development for the company in the long run, as it could accelerate the certification process. We believe that a zero-emission vehicle capable of flying 300 nautical miles could prove highly attractive in the regional air market.
New Regulatory Backdrop
In July, the FAA issued a new Advisory Circular and updated its Modernization of Special Airworthiness Certification rule (MOSAIC) roughly a week later, both of which are expected to have a positive impact on the eVTOL market.
The new Advisory Circular establishes a new category for power-lift aircraft, including eVTOLs. This represents the first new category established by the FAA since the introduction of helicopters in the 1940s.
Valuation Target
The positive news from Horizon Aircraft over the past two months, the speculative boom in many microcap stocks this summer, and significant advancements toward commercialization by industry leaders Joby and Archer, have all helped to spur a great deal of investor interest in this microcap eVTOL company. A surge of retail investor enthusiasm pushed the share price of Horizon Aircraft above our 12-month valuation target of $1.25 just three weeks after we published that target, and the stock has remained above that target ever since.
Only Joby (up a staggering 176% in the past 8 weeks) has outperformed Horizon Aircraft’s shares in the eVTOL market since our initiation, and the performance of Horizon's shares (up roughly 130% since our initiation) is more than 3 times the substantial gains realized by the comparable group of eVTOL and related companies (up an average of 37% since May).
Given the likelihood of a capital raise to fund future development at Horizon Aircraft and our anticipation that the speculative microcap rally may lose steam in the coming months, we are maintaining our $1.25 valuation target for the time being.
While we are maintaining our current valuation target of $1.25, if the company continues to deliver good news to the market, makes meaningful progress toward meeting major milestones in the development of its eVTOL, or if the timeline to positive cash flow is reduced, we will reevaluate this target.
Investors can review our opinion on the latest eVTOL news and the rapid regulatory changes taking place in our full research report.
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