Joby Aviation (JOBY) is making "meaningful progress" in aircraft certification but the company has already "largely missed" the milestones it had set back in 2021, Morgan Stanley said in a Thursday note.

The company initially targeted to receive Federal Aviation Administration Type Certification in 2023, to be followed by commercial service launch in 2024, but now expects the certification in 2026, according to the note.

"We think the risk regarding FAA approval of the manufacturing process is underestimated," Morgan Stanley said, noting that Joby would need a production certificate for each aircraft and then an airworthiness certificate before going into service. Morgan Stanley said this risk led it to lower its estimates for cumulative aircraft deliveries from 2026 to 2033 by 40%, or 975 aircraft.

With the expected lower aircraft production, Morgan Stanley said it also cut its cumulative 2026 to 2033 revenue forecast for the company, along with capex and earnings before interest and taxes. This, however, is expected to unlock free cash flow for Joby, the investment firm noted.

Morgan Stanley raised its price target on Joby Aviation stock to $15 from $7 and reiterated its equal-weight rating.

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