Vertical Aerospace Ltd. (NYSE:EVTL) received an updated price target from Canaccord Genuity, which increased it to $15.00 from the previous target of $1.50.
The firm has maintained a Buy rating on the stock. The adjustment comes as Vertical Aerospace's shares started trading on a reverse split-adjusted basis, following a 1-10 reverse share split aimed at ensuring compliance with NYSE listing standards.
The NYSE requires companies to maintain an average trading price above $1.00 per share. Vertical Aerospace's management executed the reverse split to meet this requirement. Canaccord Genuity's revised price target reflects the new share count that resulted from the reverse split.
In addition to the reverse split, the analyst's updated model includes considerations for the current GBP/USD exchange rate and projections for a potential near-term capital raise by the company. The firm's valuation method involves a discounted free cash flow (FCF) analysis that extends through the year 2035, applying a 12.6% discount rate.
In other recent news, Vertical Aerospace has made significant strides in the development of its electric Vertical Take-Off and Landing (eVTOL) aircraft, the VX4.
The company has completed the first phase of piloted flight tests and is now preparing for untethered thrustborne testing. 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.
Financially, Vertical Aerospace reported a first-half operating loss of £20 million ($25 million), primarily due to the development of its second full-scale prototype aircraft.
However, the company has secured significant funding, including $34 million from Rolls-Royce (OTC:RYCEY) for an alternative Electric Propulsion Unit (EPU) design, a £8 million ($10 million) UK Government grant for propeller development, and $25 million from Imagination Aero Investments Ltd.
The company's Board of Directors has approved a reverse share split at a ratio of 1 for 10. Additionally, Canaccord Genuity adjusted Vertical Aerospace's price target from $1.75 to $1.50, while maintaining a Buy rating.
The company is making progress in testing its VX4 aircraft, which has shown a 20% improvement in power-to-weight ratio over its predecessor. The company has secured 1,500 pre-orders for the VX4, valued at approximately $6 billion.
InvestingPro Insights
As Vertical Aerospace Ltd. navigates through its recent reverse share split and adjusts to new market conditions, real-time data from InvestingPro provides a clearer picture of the company's financial health. With a market capitalization of $127.66 million, the company's valuation reflects the challenges it faces, including a negative P/E ratio of -1.41, indicating investor concerns about profitability. Moreover, the price-to-book ratio stands at -2.42, further underscoring valuation issues.
InvestingPro Tips highlight that while Vertical Aerospace holds more cash than debt, which is a positive sign for liquidity, the company is quickly burning through cash. This could be worrisome for investors, especially in conjunction with a significant one-week price total return of -27.47%, showcasing recent market volatility. Additionally, analysts do not anticipate the company will be profitable this year, which aligns with the negative return on assets of -61.15% over the last twelve months.
Despite the ambitious price target set by Canaccord Genuity, these metrics suggest that Vertical Aerospace faces considerable hurdles. Investors interested in a deeper dive into Vertical Aerospace's prospects can find over 13 additional InvestingPro Tips that may shed light on the company's potential to navigate its financial challenges, available at https://www.investing.com/pro/EVTL.
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