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INVESTING

Surf Air Mobility: A Hidden Gem in —Investment Opportunities in Direct Listings

In the intricate tapestry of growth stocks, where buzzwords like “innovation,” “scalability,” and “disruptive technologies” are often bandied about, it’s easy to overlook the companies that are genuinely groundbreaking. One such company is Surf Air Mobility, which has been quietly revolutionizing the electric aviation sector. This firm recently chose a less conventional route to the public markets—a direct listing. This method, although less traveled, has been successfully employed by companies like Spotify, Slack, Uber, and Peloton.

It’s worth noting that Surf Air Mobility is in good company when it comes to direct listings. Giants like Spotify, Uber, Slack, and Peloton have all chosen this unconventional route to go public. Each of these companies had their unique reasons for doing so, but they all recognized the benefits of avoiding the traditional IPO process, such as greater liquidity and a more straightforward path to market. It’s a strategy that has its risks, but also its rewards, as these companies have shown.

The decision to go public via a direct listing has led to a temporarily depressed stock price for Surf Air Mobility. This is exacerbated by the current market volatility and a challenging period for high-growth companies. However, this dislocation from the company’s fundamental value is not a bug but a feature for the discerning investor. It’s a golden opportunity to buy into a company with enormous potential at a discounted price. Indeed, the stock has already rebounded 50% from its lows, signaling that the market is beginning to recognize its inherent value.

Adding another layer of credibility to Surf Air Mobility’s investment case is the coverage it has received from highly reputable bank research analysts. Firms like Canaccord, Bernstein, and Piper Sandler have already initiated coverage of the stock, setting price targets that indicate a significant upside from current levels. For instance, Piper Sandler has noted that the company has been overlooked due to the unfortunate timing of its direct listing, which coincided with earnings season and the summer vacation period. Yet, the firm emphasizes Surf Air Mobility’s existing business, which boasts over $100 million in annual revenue and a sustainable growth rate in the mid-20% range.

But Surf Air Mobility is not just another aviation company. It stands at the forefront of the green aviation revolution. By focusing on the electrification of short-distance travel, the company is positioning itself to make a significant impact on reducing carbon emissions. This is not just a lofty ideal but aligns with a broader national and indeed global goal to create a viable Regional Air Mobility (RAM) market. According to estimates from McKinsey & Company, this sector could be worth as much as $115 billion globally by 2035.

While other electric aviation companies like Joby and Archer are working on entirely new types of aircraft, which will require billions in capital expenditure, Surf Air Mobility has adopted a more pragmatic approach. The company is already flying passengers and has plans to leverage its existing infrastructure to introduce electrified Cessna Grand Caravan EX aircraft by the first half of 2024. This positions Surf Air Mobility not just as another player in the electric aviation space but as a potential category winner. It offers a unique diversification strategy for investors who are looking to hedge their bets in this emerging market.

One of the unique advantages that Surf Air Mobility has is its exclusive partnership with Textron Aviation Inc., the largest manufacturer of general aviation aircraft. This collaboration aims to electrify one of the world’s most prolific turboprop aircraft, the Cessna Grand Caravan. This is not just another business deal but a strategic alliance that could significantly shift the dynamics of regional air travel.

In conclusion, the recent direct listing of Surf Air Mobility may have led to a temporary misalignment in its stock price, but this should not deter investors from recognizing its intrinsic value. As the dust settles from the direct listing and the stock price begins to stabilize, the company’s promising metrics and pragmatic approach to electrification make it a compelling investment opportunity. With a limited number of public companies in the RAM space, Surf Air Mobility is also uniquely positioned to serve as a key consolidator in the regional air travel infrastructure within the United States. This could pave the way for private companies in the RAM space to gain liquidity through strategic partnerships with Surf Air Mobility.

In a market often swayed by short-term sentiments and buzzwords, Surf Air Mobility stands as a testament to what can be achieved with a clear vision, strategic partnerships, and a pragmatic approach to innovation. For investors willing to look beyond the immediate noise and volatility, the company offers a compelling case for long-term value creation. As someone who has closely followed the electric aviation space, I can say that Surf Air Mobility is a company that deserves your attention. It’s not just another stock; it’s an investment in the future of sustainable travel.

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