Archer Aviation (NYSE:ACHR) shares were taking a bit of a beating in Monday’s session, but for those following the company’s progress, a pullback was due at some point. After an extraordinary rally, the stock remains up by 115% over the past month, even after Monday’s trouncing.
So, what’s all the fuss about here? Well, flying taxis, basically, or more accurately, the company is an eVTOL (electric vertical takeoff and landing) aircraft maker, focused on urban air mobility. Archer’s futuristic goal is to create a sustainable and efficient way for people to travel within cities, reducing congestion and cutting emissions. It’s flagship aircraft, Midnight, is a sleek, all-electric vehicle capable of short trips with minimal environmental impact.
And some big names are on board. The company boasts significant support from auto giant Stellantis, an impressive $6 billion order book, deals with United Airlines and the UAE, and a contract with the U.S. Air Force worth up to $142 million.
And importantly, the recent buzz around the stock stems from the prospect of flying taxis transitioning from futuristic fantasy to imminent reality. This optimism is bolstered by regulatory momentum: the FAA has issued final regulations to facilitate the commercial introduction of these innovative aircraft, and Archer is making strides toward FAA certification for commercial operations. Meanwhile, the UAE is on the cusp of embracing eVTOLs, with Japan potentially following suit in the near future.
So, plenty to get excited about, as Barclays analyst David Zazula noted. “Archer has made material certification and commercial progress in 2024 and the company remains well funded following increased investment from Stellantis. The recent positive price action in the stock is justified, in our view,” the analyst opined.
That said, Archer has yet to actually generate any revenue, and it’s not yet guaranteed that regulatory approval in the US will happen. Plus, there are the outsized gains to consider. “Given this increase in the company’s share price, and the persistent risk across the industry of the novel electric aircraft certification process, we view the positive risk-return profile of Archer relative to peers to be still present, but diminished,” Zazula further said.
As such, Zazula rates ACHR shares as Equal Weight (i.e., Neutral), while his $4.5 price target implies the shares are overvalued by 39%. (To watch Zazula’s track record, click here)
However, the 3 other recent analyst reviews on file disagree with the Barclays view, all recommending to Buy, making the consensus view on ACHR a Strong Buy. Additionally, the $9.38 average target suggests the shares will climb 30% higher in the months ahead. (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.