Expect Archer Aviation to Stay a Leader in the Flying Car Space. Here’s Why.

Chris MacDonald

Tue, Nov 14, 2023, 9:10 PM 4 min read

Archer Aviation (NYSE:ACHR) has emerged as a top pick in the eVTOL (electric vertical takeoff and landing) sector, featuring a strong year-to-date gain of more than 125% and near-term solid momentum. Growth investors have continued to pile into this stock. Despite notable short interest at 26%, ACHR stock continues to hold its higher elevation as investors bank on the future of this nascent sector.

The company’s recent $215 million funding round in August, with backing from Stellantis (NYSE:STLA) and Boeing (NYSE:BA), underscores its significant long-term growth potential.

After an IPO (via SPAC merger), Archer has overcome various initial hurdles. In 2023, its stock doubled amid rising eVTOL interest. Although currently in a pullback from all-time highs, Archer’s notable backers, U.S. Air Force contracts, and a significant airline partnership position it for success in the expanding multi-trillion dollar eVTOL industry. This is what’s led to the stock’s recent outperformance this year.

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Let’s dive into what could allow this momentum to continue into 2024.

Progressive Towards Commercial Flight Launch

Archer Aviation shares dipped after Q3 earnings on Nov. 9, as the company posted losses amid high operational costs. However, investors are optimistic about Archer’s 2025 commercial flight goals. Key milestones included progress with the aircraft Midnight and plans for air taxi services in UAE and India, setting the stage for FAA testing in the coming year.

Archer’s CEO, Adam Goldstein, expressed satisfaction with Q3, citing significant milestones like Midnight’s flight and international partnerships. The company, backed by a $145 million PIPE investment and $70 million from Stellantis, holds nearly $600 million in liquidity. Archer also emphasized securing a debt facility of up to $65 million for its Georgia manufacturing facility.

Good-Looking Q3 Earnings Report Results

In Q3, Archer reported a net loss of $51.6 million and GAAP operating expenses of $46.2 million. Despite these losses, investor confidence remains strong due to robust investments, cash reserves, and commercial strategies.

Archer’s Q4 2023 financial forecasts project GAAP operating expenses between $100 million and $110 million and non-GAAP operating expenses from $75 million to $85 million, considering stock-based compensation, warrant expense, and other one-time costs.

Archer Aviation faces cash flow challenges, but with strategic progress, a robust balance sheet, and a commitment to a 2025 commercial launch, there’s cautious optimism. Investors should closely monitor regulatory approvals in the coming years.

Archer Stands Tall

Archer faces stiff competition in the aviation industry from companies like Joby Aviation, Eve Holding, Blade Air, EHang, Lilium, and Vertical Aerospace. However, Archer gained an edge by settling litigation with Wisk Aero, a Boeing-backed competitor. Boeing, Stellantis, United Airlines (NASDAQ:UAL), and ARK Invest (NYSEARCA:ARKK) contributed to Archer’s recent $215 million funding round, bringing the total raised to over $1.1 billion.

In another strategic move, Archer, in partnership with the Abu Dhabi Investment Office, initiated plans for an all-electric air taxi service in the UAE by 2026. Simultaneously, Archer is set to enter the Indian market through collaboration with InterGlobe Enterprises in 2026. With significant investor support, Archer anticipates substantial growth in the upcoming quarters.

Now’s the Time to Be Cautiously Bullish on ACHR Stock

Archer Aviation has seen a robust year-to-date surge, though a recent consolidation suggests a potential for another substantial rally. The company’s imminent foray into eVTOL aircraft operations by 2025, scaling up by 2028, adds to the bullish outlook.

Overall, I think this stock’s recent price action indicates how bullish the overall market is on its prospects over the medium- to long term. I think it’s time to be cautiously bullish on ACHR stock, though betting the farm at these levels isn’t advised. This is one of those speculative growth names that could rocket much higher or sag lower if economic conditions deteriorate. Thus, investors should consider this stock in alignment with their overall risk tolerance level.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.