Archer Aviation (NYSE:ACHR) investors were in pain for most of the year, but sentiment can shift fast on Wall Street. And that has happened very fast indeed for the eVTOL (electric vertical take-off and landing) aircraft maker. Over the past month and a half, the stock has turned from a big laggard to a huge winner having gained more than 200% over the period.
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Investors have been excited about quite a few developments taking place at Archer and the potential for the company to be a big player in an industry that is only getting started. The snappy pitch is that eVTOLs are set to be “flying taxis” with the prospect of FAA certification real in the not-too-distant future.
The most recent announcement from Archer, however, shows the potential for its products to be more than just that. Earlier in the week, Archer announced an exclusive partnership with private firm Anduril Industries to develop a hybrid-propulsion VTOL aircraft. As part of its newly launched “Archer Defense” program, the company aims to secure a program of record with the Department of Defense (DoD).
Cantor analyst Andres Sheppard views this development as a major milestone, noting: “While we expect ACHR to continue to primarily prioritize its eVTOL segment, we believe the company will now be able to focus on a dual-use with the military, via its hybrid VTOLs. Hybrid VTOLs should result in extended flight range, lower battery risk, and a higher payload capacity. This makes it more suitable for military use, in our view, which in turn should increase ACHR’s Total Addressable Market (TAM).”
Moreover, by going after military missions with the DoD, Archer can bypass the need for FAA-type certification for its hybrid aircraft. This approach, says Sheppard, “helps to de-risk the business” in case of delays in type certification for its eVTOL. Additionally, it opens up a potential new revenue stream, though management hasn’t offered any details on that yet.
Meanwhile, at the same time, the company said it had secured an additional $430 million in equity funding, which included contributions from strategic partners Stellantis and United Airlines. Following the recent capital raise, Archer’s total liquidity stands at approximately $932 million (with the potential for an additional ~$400 million from Stellantis). Management has indicated that no additional near-term financing is expected.
Put together, Sheppard likes how the ACHR story is unfolding. “We continue to view the partnerships with United Airlines, the Department of Defense (DOD), and Stellantis as important differentiators that should help the company ramp up its operations, testing, and manufacturing, respectively,” the analyst summed up.
As such, while staying “bullish on ACHR over the long-term,” Sheppard rates the stock an Overweight (i.e., Buy), while raising his price target from $10 to $13, implying the shares will gain another 45% over the coming months. (To watch Sheppard’s track record, click here)
Most other analysts agree with the Cantor view; the stock claims a Strong Buy consensus rating, based on 6 Buys vs. 1 Hold. Going by the $11.29 average price target, a year from now, shares will be changing hands for a 26% premium. (See ACHR stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
