Joby Aviation just soared 28% on a big vote of confidence; A look at Nike's latest earnings; The value of Berkshire Hathaway Energy has declined by 45%

Catching up on the latest news on three companies I've written about at various points this year...

1) The stock of air-taxi company Joby Aviation (JOBY) soared 28% yesterday (though it's pulling back a bit today) after announcing an additional $500 million investment by its partner Toyota Motor (TM)... which will bring the automaker's total investment in Joby to $894 million.

Through yesterday's close, the stock is up 26% since I last wrote about it in my April 23 e-mail, which followed up on my in-depth analysis in my January 18 and January 19 e-mails.

Since then, Joby has continued to make progress toward getting its radically innovative aircraft approved for commercial flight by the Federal Aviation Administration.

In the meantime, since the company generates virtually no revenue and burns roughly $100 million per quarter, the cash infusion by Toyota is a strong vote of confidence... and adds to the $825 million in cash Joby had on its balance sheet at the end of last quarter.

By coincidence, Joby has a "pop up" display at Grand Central Station in New York City this week. So I biked there yesterday to check it out and catch up with my old friend Bonny Simi – the company's president of operations. Here's a picture of us, along with two pictures of me sitting in one of Joby's aircraft:

2) In contrast to Joby...

Shares of apparel giant Nike (NKE) slid about 7% yesterday after the company reported dismal first-quarter 2025 earnings. Year over year, revenues were down 10% and earnings per share fell 26%. Nike also postponed its investor day and withdrew full-year guidance.

To me, this smells like a classic "kitchen sink" quarter – in which a company tries to get all the bad news out such that there's a low bar for the incoming CEO (and his stock options will be struck at the lowest possible price).

Here's an insightful article from the Wall Street Journal yesterday on the challenges the company faces: Nike Needs Time to Get Off the Sidelines. Excerpt:

It is never easy for a top performer like Nike to lower the bar, but it will be much easier to do so with a new leader.

The apparel giant on Tuesday had some bad numbers to report. Revenue declined 10% in its quarter ended Aug. 31 compared with a year earlier, in line with its guidance and Wall Street expectations polled by Visible Alpha. That marks the worst quarterly drop since the initial pandemic shock of 2020. But cost cuts, including layoffs, helped the company achieve better-than-expected earnings results. Net income was down 28%, much better than the 47% drop analysts had expected.

The company is in something of limbo right now, with Chief Executive Officer John Donahoe set to step down soon. Donahoe didn't speak during the company's earnings call Tuesday after the market close; Chief Financial Officer Matthew Friend led the call instead. Elliott Hill, a well-liked, 32-year Nike veteran, is set to return to the company and start in the CEO role on Oct. 14. Nike's shares have rebounded by about 10% since the company announced his appointment, though they are still down about 18% year to date.

Later in the article, it discusses Hill:

Investors don't have much to go on just yet, except that Hill seems to be universally liked by Nike employees and that he has experience dealing with retail partners. On the call, Friend said employees' response to his appointment has been "tremendous." He added that Hill played an important role in turning around Nike's North America business in 2010. The market, however, won't get a clear read on his strategy for a while. Nike postponed its November investor day, which means investors might not get to hear from the new leader until next year.

When Hill officially joins, he will have the chance to perhaps lower the bar even further. When Adidas's current CEO, Bjørn Gulden, joined in early 2023, he called that year a "reset year" and lowered expectations. After a year of no revenue growth (on a currency-neutral basis), Adidas returned to healthy growth in the first two quarters of 2024. Adidas shares have appreciated about 90% since Gulden took over.

Regular readers will recall my e-mails on August 9 and August 12 when I took a look at Nike and its beaten-down stock – as I concluded then:

As long as the guy responsible for Nike's woes – CEO Donahoe – is still in charge, I have little confidence that he'll be able to admit his mistakes and fix them. I would want to see a change in leadership – or at least clear evidence that current leadership is on the right track to fix issues.

Nike announced the leadership change on September 19 (which I discussed in my September 20 e-mail). And as I said, a leadership change would be key to the company's turnaround.

When it comes to Hill, here's a recent WSJ profile of him: Elliott Hill Loved Nike and Left It. Now He's Back as CEO. Excerpt:

Nike's incoming chief executive is known for welling up with tears when he speaks about the company because he cares so much about it.

Elliott Hill started working at the sneaker giant in 1988 as an intern, taking calls from customers and moving boxes in a warehouse. Over more than three decades, he climbed to be one of its top executives before he was passed over for CEO and retired in 2020.

I'm not sure I've ever seen a LinkedIn page like Hill's – take a look at this screenshot showing his path through Nike:

Hill is a true company lifer, so I think he's a good bet to boost morale and return Nike to greatness.

The setup here reminds me of when Jim Cantalupo, another company lifer, became CEO of McDonald's (MCD) in January 2003 and turned around the company so quickly that I named him CEO of the Year in a Motley Fool article later that year.

I loaded up on the stock and rode it for five years – as I've said many times in my daily e-mails, it was one of the best investments of my career.

When it comes to Nike, as I also mentioned in my September 20 e-mail:

After a deeper look with my team, we concluded there was a compelling risk-reward setup (in particular because Nike was likely to replace its CEO). So we recommended the stock to [Stansberry's] Investment Advisory subscribers two weeks ago in the latest monthly issue.

(If you're an Investment Advisory subscriber, you can see our full write-up and specifics of our recommendation right here.)

My team and I are taking a closer look at Hill and Nike's earnings report and will share our combined conclusions in the next Investment Advisory issue with our paid subscribers – who will be the first to know about any changes in advice with our recommendation.

It publishes tomorrow evening after the market close... So if you aren't already an Investment Advisory subscriber, you can learn how to become one – and find out how to gain immediate access to the entire portfolio of open recommendations – right here.

3) Finally, a quick update on Berkshire Hathaway (BRK-B), about which I've written three times in the past week...

On Friday and Monday, I outlined the short thesis on the stock. And on Tuesday, I responded and concluded that it's a "comfortable hold for long-term-oriented investors."

On September 30 in an 8-K filing, Berkshire disclosed that it took its ownership in Berkshire Hathaway Energy ("BHE") from 92% to 100% by buying the stake held by the estate of the late Walter Scott, Jr., a childhood friend of Warren Buffett and a Berkshire board member for more than 30 years.

For more details on this, see these two blog posts:

• The Rational Walk: Berkshire Hathaway Acquires BHE Minority Interests
• Watchlist Investing: 123: Buffett Thinks Berkshire Hathaway Energy Is Worth 45% Less Today

The total consideration of about $4 billion – consisting of nearly $2.4 billion in cash, about $1 billion in Berkshire stock, and a $600 million promissory note – is a rounding error in light of Berkshire's nearly $1 trillion market cap.

But the deal is interesting for two reasons...

First, the implied valuation of BHE at $49 billion is 45% lower than it was just two years ago, when Berkshire acquired the 1% of BHE owned by its chairman and CEO (and Buffett's designated successor), Greg Abel. This no doubt reflects the uncertainty BHE faces regarding wildfire litigation costs and changes in the regulatory and political landscape, which I discussed in Monday's e-mail.

Second, Buffett has always been reluctant to issue stock to make acquisitions (or for any other reason), especially when Berkshire is drowning in $277 billion in cash right now. Thus, there's speculation that his partial use of his stock in the latest transaction reflects his view that it's fully valued. I tend to discount this – I suspect the reason was that Scott's heirs wanted to roll their BHE stock into Berkshire stock to defer taxes.

In summary, while the adverse developments that have cut the value of BHE from $89 billion to $49 billion are unfortunate, they don't change my view of Berkshire's stock.

Best regards,

Whitney

P.S. I welcome your feedback – send me an e-mail by clicking here.