Experience Investment Is a Cynically Profitable Investment in the New Normal

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© Source: Chart by Josh Enomoto a man assists a woman getting out of a helicopter

With special purpose acquisition companies (SPAC) flooding the market, it’s difficult to decipher which one has substance and which are merely riding SPAC fever. However, jaded investors will still want to consider Experience Investment (NASDAQ:EXPC), even with the over-the-top rally in EXPC stock.

© Provided by InvestorPlace a man assists a woman getting out of a helicopter

For one thing, Experience Investment has its sights set higher than many other SPACs and I mean that quite literally.

Experience Investment Is a Cynically Profitable Investment in the New NormalScheduled to merge with Blade sometime in the first half of this year, the target company specializes in urban mobility, specifically the aerial kind. Right there, EXPC stock distinguishes itself from the electric vehicle mania.

Second, the business itself is very compelling. According to its press release, Blade specializes in four operating segments:

  • Short-distance flights between 60 and 100 miles, and priced between $595 to $795 per seat (or $295 for a monthly commuter pass).
  • Airport-to-airport flights in New York, with prices starting at $195 per seat (or $95 per seat with annual pass).
  • Human organ transporter for the northeastern region of the U.S.
  • International joint ventures providing urban air mobility services in key overseas markets.

Third and more important for EXPC stock, the underlying numbers make sense. For starters, “more people fly helicopters in and out of U.S. city centers via Blade than any other company in the world.” As well, Morgan Stanley Equity Research expects urban air mobility to be a $125 billion market in 2025 and grow to $650 billion over the next decade.

Before you go too crazy for EXPC stock, I should point out that other research firms have far lower projections. For instance, BISresearch.com sees urban air mobility as a $5.32 billion market, growing to $86.83 billion by 2035.

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Then again, anything can happen, especially with Blade’s meteoric growth in its user base. As our own Louis Navellier – whom many of our readers probably call Ferrari (NYSE:RACE) Louis – stated, “Blade is, without a doubt, an early mover and emergent leader in urban air-mobility services. The company had 1,000 passengers in 2014, but that number swelled to more than 37,000 last year.”

What’s not to love?

The Crisis Is Awesome for EXPC Stock

Well, there’s this little thing called the novel coronavirus flying around. Maybe you’ve heard of it?

On the surface, the pandemic imposes two headwinds on EXPC stock. First and foremost, fewer people are out and about in terms of wanting to fly. Yes, there’s a huge improvement in air travel sentiment. However, we’re still talking about demand that’s around 40% of the year-ago level. That’s just not going to cut it.

Second, the pandemic represents an economic crisis, not just a health-related one. And that’s what will bother prospective buyers of EXPC stock. Eventually, outbreaks fade. But economic pain can last for many, many years.

Ordinarily, I’d be leery of companies that are tied to discretionary spending. Yes, Ferrari Louis notes that Blade enables “travelers — or at least, those who could afford it — to bypass traffic and possibly shorten a two- or three-hour trip to less than an hour.” But with so much work being done through telecommuting channels and with less traffic because of Covid-19, this is an easy budget item to cut out.

Also, keep in mind that rich people who use such services can be the stingiest people you can hope to meet. That’s in part why the affluent cut their spending the most during this crisis, which had the trickle-down effect of hurting the lower-income workers who serve them.

The Wealth Gap

© Provided by InvestorPlace Wealth inequality in the U.S.

On that front, EXPC stock has some risks. But on the other end, the wealth gap in the U.S. is enormous.

Back in the 1990s, the wealth gap was a roughly 60/40 split. The top 10% of the wealth bracket had approximately 60% to 61% share of net worth, while the bottom 90% had 39% to 40%.

Currently, we’re looking at a roughly 70/30 split. Over the past few decades, the 10% of the wealth most people don’t spend on Ferraris made its way into the hands of those who do. So that’s a lot of money for the extremely well-to-do to spend on air mobility services.

Also, the wealth gap should worsen over time. That’s because wealth-generating vehicles such as stocks are frankly best wielded by those with money, which buys education or at least a very good financial advisor.

In other words, when the invariable bear market arrives, more wealth might transfer to the rich, not the other way around.

The Health Aspect Is a Catalyst Too

I’ve mentioned this a couple of times before but it’s worth repeating here. According to a survey by Deloitte’s Digital Media Trends: “Even if they had the option to do so, 71% of consumers said they would not be comfortable going to a theater within the next month — and just over half said they were unwilling to go see a movie in-person in the next six months, per the study.”

Certain politicians can scream all they want about ‘Merica and freedom. I don’t necessarily disagree. But the reality is that a large segment of the population is scared of contracting Covid-19. That includes the rich. However, they have the funds to avoid getting sick, while the working class do not.

Unfortunately, this is a contributing factor to why so many communities of color have been disproportionately hit hard by the virus.

Of course, very few people relatively speaking can afford to advantage urban air mobility services. That right there enhances one’s chances of not catching the coronavirus. Thus, whether you look at EXPC stock from the near-term angle or the longer term, Blade is a business worth considering.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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