On Monday, Canaccord Genuity increased its price target for Vertical Aerospace Ltd. (NYSE:EVTL) to $16.00, up from the previous target of $15.00, while sustaining a Buy rating for the stock. The adjustment comes in light of recent developments that are believed to mitigate risk for the company's shareholders and bolster its "Flightpath 2030" strategy aimed at becoming a predominant global Original Equipment Manufacturer (OEM) for electric Vertical Take-Off and Landing (eVTOL) aircraft.
The firm's management has highlighted that the terms set for the company's upcoming offering should instill confidence in both investors and aerospace suppliers, especially the Electronic Power Unit (EPU) suppliers, though they remain unnamed. This confidence is pivotal for Vertical Aerospace as it continues its flight testing and certification processes slated for 2025. Furthermore, the company retains the flexibility to strategically raise additional capital as needed through its $180 million mixed shelf offering.
The analyst noted that the offering, backed by significant investors such as Mudrick and Fitzpatrick, ensures that Vertical Aerospace is well-positioned financially to avoid a liquidity crunch at the end of 2025. The company's financial strategy includes a 50% debt reduction, with the remaining $130.2 million incurring a 10% cash interest expense starting December 15, 2024.
In response to these financial maneuvers, Canaccord Genuity has updated its model to reflect the anticipated effects of the equity raise. The firm has also revised the discount rate on its Discounted Cash Flow (DCF) analysis through 2035 to 11.5%. These changes underpin the decision to raise the price target for Vertical Aerospace to the new $16.00 figure.
In other recent news, Vertical Aerospace Ltd. has been making significant strides in its operations. The company reported a first-half operating loss of $25 million, primarily due to the development of its VX4 prototype. Despite this, it has secured substantial funding, including $34 million from Rolls-Royce (OTC:RYCEY) for an alternative Electric Propulsion Unit (EPU) design, a $10 million UK Government grant for propeller development, and $25 million from Imagination Aero Investments Ltd.
The company's Board of Directors approved a reverse share split at a ratio of 1 for 10 to ensure compliance with NYSE listing standards. This action has been factored into Canaccord Genuity's revised price target for the company, which was raised to $15.00 from the previous target of $1.50, maintaining a Buy rating.
In terms of operational progress, Vertical Aerospace has completed the first phase of piloted flight tests for its electric Vertical Take-Off and Landing (eVTOL) aircraft, the VX4. The UK Civil Aviation Authority (CAA) and the European Union Aviation Safety Agency (EASA) have established a collaborative approach for the VX4's certification process.
Notably, the company has secured 1,500 pre-orders for the VX4 from clients across four continents, including notable names like Virgin Atlantic, American Airlines (NASDAQ:AAL), and Japan Airlines. These are recent developments in Vertical Aerospace's ongoing efforts in the field of electric aviation.
InvestingPro Insights
While Canaccord Genuity has raised its price target for Vertical Aerospace Ltd. (NYSE:EVTL), recent data from InvestingPro paints a more cautious picture. The company's market cap stands at $153.04 million, reflecting its position as a smaller player in the aerospace industry. InvestingPro Tips highlight that EVTL is "quickly burning through cash" and "suffers from weak gross profit margins," which aligns with the company's need for strategic capital raising mentioned in the article.
The stock's performance has been challenging, with InvestingPro data showing a -48.49% price total return over the past three months and a -38.59% return over the past year. This volatility is consistent with the InvestingPro Tip indicating that the "stock generally trades with high price volatility."
Despite these challenges, it's worth noting that according to InvestingPro, EVTL's "liquid assets exceed short term obligations," which could provide some financial flexibility as the company pursues its "Flightpath 2030" strategy. Investors considering EVTL may find value in exploring the additional 10 InvestingPro Tips available, which could offer further insights into the company's financial health and market position.
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