Looking back
We started our Loving Lilium LinkedIn articles almost a year ago with Loving Lilium (1): Falling in Love. The most popular article is Loving Lilium (9): The Investors Journey (I). In the Investors Journey (I), we gave our motivation why we selected Lilium stock and summarized the challenges Lilium faces on her journey to become the leading e-VTOL in Regional Air Mobility (RAM). It’s time to give you an update of the Investors Journey.
In 2023 Lilium made a lot of progress and achieved all planned milestones. That builds confidence, because investing in start-ups is a risky journey, most of all start-ups fail. The market indicated a failure for Lilium in April, just before major shareholder Tencent injected fresh capital at $ 1 in May. So year 2023 was a turbulent year, with a stock price in the range of 37 – 190 dollar cents till now.
Barclays
A year ago, on December 7 2022, Barclays downgraded Lilium stock from target price $2 to $1. Barclays said “We expect the business to ultimately perform well, but due to sizable unfunded spending needs through certification, equity holders should be conscious of additional issuance and corresponding reduction in ownership stake”.
This is exactly what happened in 2023, issuance of shares, warrants and pre-paid warrants to Tencent, totally generating $292 funding. For now, there are 525 mln outstanding shares (class A+B) and 260 mln warrants/stock options etc, including 160 mln prepaid Tencent warrants. So in potential, the total number of outstanding shares will be up to 785 mln! Dilution at low stock valuations (2023 $1 in May respectively $ 1,30 in July) can be a nightmare for some early shareholders, but Lilium secured another “cash burn year” in difficult market circumstances.
Lilium shareholders need ongoing transparency about Lilum’s funding needs and certification milestones. Let’s bundle some recent information, before we give our funding scenario and target prices.
1. Company Presentation
According to Lilium’s recent Company Presentation December 2023, Lilium keeps unlocking key value drivers, one of them is signing binding agreements that will generate Pre Delivery Payments (PDP’s). For further cash needs in coming years, Lilium will ramp up those PDP’s and engage in strategic and governmental funding options. There will be a focus on non-dilutive funding (loans, PDPs, grants) for the remaining funding needs.
Ps See important update(s) from Lilium’s Company information at the bottom of this document!
2. Barclays global automotive and mobility tech conference
On November 29, Barclays analyst David Zazula interviewed Sebastien Borel (CCO Lilium) and Rama Bondada (Head of Investor Relations Lilium), watch here the full video. Sebastien explains the sales strategy and how certification milestones – such as the DOA (EASA) last month – supports the sales conversion from MoU’s to firm binding agreements and Pre Delivery Payments (PDP’s). Early adaptors of the Lilium Pioneer Jet can reserve an early production slot, but only in combination with a PDP. PDP’s are part of the capital strategy. The 2024 milestones such as the first manned flight will also help non-dilutive capital funding. Note that on November 27, Barclays set the price target of Lilium stock on 75 cents (base-case scenario). Barclays upside scenario is $ 15,00 and downside scenario is 0 cents.
Starting production for the first manned flight: unlocking key value drivers in 2024.
3. Longspur Research analysis
On December 4, 2023, Longspur Research published a document just after Lilium achieved the DOA (EASA) milestone. This document clearly shows all certification steps and milestones and includes also financial forecasts. Due to more PDP’s coming in caused by the recent DOA, Longspur now forecasts on page 9 a positive cash position of € 138 mln end 2024 versus the € 5 mln end 2024 predicted in their battery webinar document of November 13.
Ps See important valuation update(s) from Longspur at the bottom of this document!
4. Strategic partnerships
The recent DOA milestone triggered on December 7 the start of the strategic partnership MoU with Lufthansa, just a short period after the second Chinese Great Bay partnership with CITIC Offshore Helicopter. This boosts our confidence that Lilium is on track to become the leading eVTOL in RAM.
Remind that the recent Barclays target price of 75 cents was set before the Lilium – Lufthansa MoU was signed.
Scenario strategic dilutive funding
For now, we hope that dilutive funding @ the low 2023 levels of $1 – $1,30 is not necessary anymore. Lilium first has to proof in 2024 that it is (again) able to unlock key value drivers and become attractive for new strategic shareholders. New dilutive funding – in our opinion – must only be available for new strategic partners, bringing in more benefits for Lilium like orders and (cost) synergies. But before that, we first need a much higher share price, in the range of $3 – $5. Last summer, new strategic investors came in with Joby and Archer, even at much higher levels. If that happens, a scenario of a placement of 215mln new shares @ $3 will generate $645mln new capital, which bridge more than all future funding needs. In this scenario there will be up to 1 bln shares (785mln + 215mln) ultimately.
Our target price and 2024 expectations
We think that that a viable business model in the period 2028-2032 is possible with an annual production of at least 400 Lilium Jets. Yearly average revenues for production and recurring services of €4 bln can generate a potential 10% ebitda margin. With a maximum of 1 bln outstanding shares in 2028, a valuation of 10 – 20 times ebitda and a euro/dollar conversion of 1, the potential upside is a share price range of $4 – $8. $8 is also explained by a valuation of 2 times the sales revenue of $4 bln. Perhaps more is possible, if Lilium is able to bring the 50-100 pax ducted fan eCTOL into market before 2030.
For 2024 we expect a stock price in the range $1 – $3,20. For the higher level we first have to break the $1,42 and the $1,90 summer top.
The e-mobility trend is our friend
We hope that Lilium starts to develop the 50-100 pax ducted fan eCTOL soon. That will boost investor’s confidence, because about 80% of all commercial flights are within a 2000km range. Costs of SAF and hydrogen flying are too high related to electric flying, so the e-mobility trend is our friend.
Important updates after publication of this article:
December 9: CNN Tech for Good TV about Lilium Jet and sustainable mobility.
December 12: Vertical Magazine interview with Daniel Wiegand, with more battery related details as a further delve into the previous Lilium’s November battery webinar. Daniel in Vertical Magazine:
“If you take Lilium, I think right now we are pretty much undervalued partly because of the current global financial environment.” It’s important to watch this interview and webinar for (potential) investors, reducing some risk perceptions by Lilium’s fast growing transparency.
December 13: movie Lilium Jet at VIP Terminal in Dubai (UAE) during COP28. This movies expresses Lilium’s sales strategy with regional dealerships such as ArcosJet (UAE etc) for launch in the premium segment, at the ultimate private jet terminal that caters to the world’s top 1%.
December 18: Lilium year in review, with all 2023 milestones, unlocking key value drivers.
December 21: eVTOLINSIGHTS podcast with Lilium’s Bhavesh Mandalia discusses company’s key milestones and continued progress towards certification. Bhavesh is Chief Airworthiness Officer and Deputy CTO at Lilium and is a key person in the certification process with EASA/FAA.
January: In the (updated) January 2024 Company information Lilium isn’t talking anymore about the focus on non-dilutive funding, but talks on the last page about “attractive entry point with strong upside”. So I expect also some dilutive funding coming up, I hope it will be limited to strategic partners.
January 11: Longspur made an important update of their financial analyses.
In their model the central case valuation of Lilium is $ 11,70 up from $ 8,20, and they expect/calculate with dilutive funding in 2024/2025 for 200 mln totally @ $ 1,30. Please read the full Longspur analysis here.
Please note that this article is not an advice to buy or sell Lilium stock. Investing in startup’s is high risk and timing is difficult, you can lose all your money. So (the high) risk profile must fit your (high risk) appetite. We are not independent, we have a Lilium position. We firmly believe that Lilium becomes the leading eVTOL in Regional Air Mobility, and perhaps the leading eCTOL in RAM. We don’t believe in Urban Air Mobility (UAM) for a viable business model.
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