Meet George Jetson…puttering his way to work in a flying car. That day is close at hand, and Archer Aviation (ACHR) is leading the way as it nears the final phase of the FAA’s four-phase type certification process for its electric vertical take-off and landing (eVTOL) aircraft. Recently, the company received a certificate of occupancy for a high-volume manufacturing facility in Covington, GA, where it aims to produce its all-electric vertical takeoff and landing aircraft, known as Midnight. Archer also announced an exclusive agreement with Anduril to develop a hybrid aircraft for defense applications. In addition, it has signed agreements with Soracle Corporation – a joint venture between Japan Airlines (JPNRF) and Sumitomo Corporation, to launch air mobility services in Japan.
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While Archer appears to be in a lead position to be first to market with its aircraft, shares remain a high-risk, high-reward investment due to market uncertainty (the 10% decline in the stock year-to-date, for example) and potential technical hurdles. However, given its upside potential, investors may want to view any dips in the share price as a buying opportunity.
Fasten Your Seatbelts and Prepare for Takeoff
Archer Aviation is a pioneer in eVOTL aviation, nearing the completion of the FAA’s 4-phase type certification process. This progression allows Archer to continue advancing towards the final phase necessary for type certification. The FAA’s recent release of the powered-lift Special Federal Aviation Regulation (SFAR) will enable Archer to establish plans to commercialize eVTOL in the U.S.
At the end of 2024, Archer completed the construction of its ARC aircraft manufacturing facility in Covington, GA. Production will commence in early 2025, with two aircraft per month by year-end and scaling to 650 aircraft annually by 2030. Plans are also underway in partnership with Stellantis (STLA) to finalize an agreement to see Stellantis become Archer’s exclusive contract manufacturer for mass production of Archer’s Midnight eVTOL aircraft at the ARC facility.
What Else Is on the Cards for Archer?
In other developments, Archer and Anduril Industries have formed an exclusive partnership to craft a hybrid propulsion vertical takeoff and landing (VTOL) aircraft for defense applications. To finance this and other corporate endeavors, Archer has raised an additional $430 million in equity capital, bringing Archer’s total capital raised to roughly $2 billion. The financing round included participation from existing partners Stellantis and United Airlines (UAL) as well as new institutional investors.
Archer has forged strategic alliances to establish air taxi networks across the U.S. and beyond. The partnerships involve heavyweights like Southwest Airlines (LUV) and Signature Aviation and aim to electrify 200 airports nationally. Internationally, a consortium led by the Abu Dhabi Investment Office (ADIO) plans to launch commercial air taxi services in the UAE, with a targeted start date in Q4 2025.
In a significant recent development, Archer partnered with Soracle, a joint venture involving Japan Airlines. Soracle intends to pioneer an operation using Archer’s Midnight aircraft, focusing on cities where ground transportation faces challenges due to traffic or geographic limitations. The firm will also strategize new flight routes in popular areas to cater to residents and domestic and international visitors. In the future, Archer and Soracle will closely coordinate with the Japanese Civil Aviation Bureau for necessary permissions and certifications. Moreover, Soracle possesses the rights to order up to 100 Midnight aircraft valued at up to $500 million.
A Significant Cash Runway
The third quarter financial results for 2024 show that Archer’s total GAAP operating expenses were $122.1 million. The company reported a net loss of $115.3 million for the quarter. Despite these losses, expenditures remained relatively steady compared to the previous quarter.
The company ended the quarter with more than $500M in cash and cash equivalents, marking one of its most substantial financial positions in the last 18 months.
Management has issued forward guidance, forecasting its total operating expenses for the fourth quarter of 2024 to be between $95M and $110M (non-GAAP).
High Short Interest, But Analysts Remain Bullish
Despite the recent downturn, the stock has been on an upward trend, climbing over 77% in the past year. It trades in the upper half of its 52-week price range of $2.82 – $12.48. Short interest in the stock is 19% of the float. High short interest indicates valid concerns, such as Archer not meeting expectations or eVTOL not achieving its potential.
Analysts following the company have mostly been bullish on ACHR stock. Archer Aviation is rated a Strong Buy overall, based on the recent recommendations of eight analysts. The average price target for ACHR stock is $11.38, representing a potential upside of 29.47% from current levels.
Final Analysis on ACHR
Archer Aviation has made promising progress toward successfully bringing an eVTOL aircraft to market. While shares present a high-risk, high-reward scenario, the investment gains could be considerable, particularly given Archer’s strong financial position, funding support from heavyweight partners, and progressive expansion plans. Savvy investors might consider the company’s potential dips in share price as opportunities for investment.
