Uber To Sell Air Taxi Unit To Joby Aviation; Top Analyst Boosts PT

Uber Technologies has entered into an agreement to sell its air taxi unit, Uber Elevate, to Joby Aviation for an undisclosed sum.

As part of the transaction, Uber (UBER) will invest another $75 million in Joby, in addition to a previously undisclosed $50 million investment made as part of Joby’s Series C financing round in January 2020. The transaction is expected to close in the first quarter of 2021, subject to regulatory and customary closing conditions.

Founded in 2009, Joby is a transportation company developing an all-electric, vertical take-off and landing passenger aircraft, which is targeted to start operating as early as 2023. Since its inception, the company has raised $820 million from investments, with it employing more than 500 people. As part of the deal, Uber and Joby have agreed to continue their partnership and integrate their respective services into each other’s apps, to enable the integration between ground and air travel for future customers.

“Advanced air mobility has the potential to be exponentially positive for the environment and future generations. This deal allows us to deepen our partnership with Joby, the clear leader in this field, to accelerate the path to market for these technologies,” said Uber CEO Dara Khosrowshahi. “We’re excited for their transformational mobility solution to become available to the millions of customers who rely on our platform.”

In a separate statement, Uber disclosed the pricing of a $1 billion private placement offering for the principal amount of 0% convertible senior notes due 2025 to qualified institutional buyers. The ride-hailing company also granted the initial purchasers of the notes an option to buy up to an additional $150 million in principal amount of the notes. Uber expects to raise $987.5 million in net proceeds from the debt sale. Should the initial purchasers exercise their option to buy additional notes in full, the proceeds are expected to yield $1.136 billion. The sale of the notes is expected to close on December 11, subject to customary closing conditions.

The Joby deal comes after Uber announced this week that it has agreed to divest its self-driving unit, Advanced Technologies Group (ATG) to rival start-up Aurora Innovation for a reported $4 billion. As part of the transaction, Uber will hold a 26% stake in the start-up.

Following the Aurora deal, Stifel Nicolaus analyst Scott Devitt ramped up the stock’s price target to $60 (13% upside potential) from $45 and reiterated a Buy rating.

“By selling ATG to Aurora, Uber retains an equity stake in the combined entity focused on autonomous driving while removing its investments from Uber’s financial statements,” Devitt wrote in a note to investors. “By selling ATG to Aurora, Uber becomes even more of a pure play on the combined emerging themes of ride-sharing and delivery.” (See UBER stock analysis on TipRanks)

The rest of the Street is firmly in line with Devitt’s bullish outlook. The Strong Buy analyst consensus boasts 19 Buys vs. 2 Holds. With shares up a stellar 78% year-to-date, the average price target of $54.40 implies upside potential of a more moderate 2.6% to current levels.