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Archer Aviation Inc. (NYSE: ACHR) is an electric vertical takeoff and landing aircraft manufacturer – or flying cars for short. It was founded in 2018 and has developed an aircraft it plans to start selling in 2024. The company is also launching a new aircraft in November which could be a catalyst for the stock. Since ACHR operates in a relatively new market, its losses have continued to widen from developing eVOTL aircraft. Insider selling and market uncertainty has forced the stock to a 52 week low of $2.50. However, ACHR has typically performed well on its earnings and ACHR stock could see a run up if it beats EPS expectations. The company has another catalyst in November related to the release of Midnight – its latest EVTOL aircraft. With this in mind, ACHR stock may deserve a second look.
ACHR Stock News
Up until the 2010s, the only people who got to operate flying automobiles were the Jetsons – maybe The Doctor too. However, with scientists and engineers trying to make up for lost time and deliver on what the masses were promised back in the 1950s, flying cars might actually become reality just a few years later than we’d hoped. Archer Aviation is one of the companies trying to deliver on that promise, and they expect their first flying “electric vertical takeoff and landing” (eVTOL) aircraft to be available in markets by 2024.
Founded in 2018, Archer already has a flying two-seater, with a 60 mile range per charge and speeds going up to 150mph. It plans on producing this aircraft at the start of next year. The company went public just over a year ago through a SPAC deal, but investors have high hopes for ACHR since shortly after its foundation a Walmart executive jumped on the bandwagon.
Marc Lore is known as a successful entrepreneur and investor. Lore was the owner of Jet.com which was acquired by Walmart, positioning him as the President and CEO of Walmart eCommerce. He has since stepped down from this position and is developing a multi-decade project to build ‘a city of the future’. Perhaps Lore believes ACHR’s eVTOL aircrafts will play a role in this city which is why he supported the company early on as its lead investor and advisor. But Lore has also founded the early-stage venture firm VCP Ventures which could also show his interest in ACHR as a start-up with long-term potential.
Despite Lore’s faith in the company at its start, ACHR has fallen quickly from its IPO which valued the company at $2.7 billion. The company is currently valued at $0.67 billion but this is not unusual for SPAC IPOs. In fact, almost all major eVTOL manufacturers have shed a lot of their value since their IPOs.
Joby Aviation Inc (NYSE: JOBY), for example, lost more than $5 billion in its valuation over a little over a year, leaving it with a market cap of $2.64 billion now. Lilium NV (NASDAQ: LIVM) is also a similar case, since it dropped from $2.99 billion to $0.53 billion over roughly a year. Vertical Aerospace (NYSE: EVTL) has also been on a roller coaster ride, but compared to its competitors it has maintained more of its initial valuation. Despite the economic conditions which have been particularly difficult for speculative growth companies, Vertical Aerospace has dropped from $2.1 billion last December to $1.89 billion.
ACHR’s steep drop in value since its IPO could be a symptom of the wider market since the company has continued to beat earnings estimates with a lower EPS loss than predicted. Archer also has a catalyst coming up which could trigger a run for the stock. On November 16th, Archer will be unveiling its new aircraft, the four-seater Midnight. This unveiling comes ahead of schedule since Midnight was previously scheduled to be revealed in 2023. The reveal could be a major catalyst for the stock, since ACHR’s management have kept their lips tightly sealed about the new aircraft.
However, ACHR has already impressed United Airlines which quickly became one of their biggest customers thanks to a $1 billion deal for Archer’s aircrafts. As part of the agreement, United may purchase an additional $500 million worth of Archer aircrafts. But so far United Airlines has only deposited $10 million of the promised $1 billion, providing ACHR with additional liquidity as it develops its aircraft.
Archer also has deals with Fiat Chrysler Automobiles giving it access to FCA’s supply chain, raw materials, and expertise. One final key partner of Archer’s is Stellantis, which not only provided it with good battery suppliers through its supply chain, but has also worked to improve certain aspects of Archer’s aircrafts, including vibration and noise reduction. Investors might appreciate these cherry-picked supply chains, which also ensure lower production costs amidst the global supply chain crisis.
A long term catalyst for ACHR is the recent legislative backing for EVTOLs. In 2021, the House of Representatives passed the Advanced Air Mobility Coordination and Leadership Act, which seeks to establish an advanced air mobility (AAM) working group. This group is tasked with assisting AAM makers and paving the way for them to ensure their operations go as smoothly as possible. The White House also hosted an AAM summit in August, where speakers highlighted the role AAM can play in serving the country and talked of the importance of regulating the industry.
But, it’s about time for a however since insider activity has sent a worrying message to investors. Some investors have been concerned with the selling activity of former Archer Co-CEO – Brett Adcock – who stepped down from his role at the company in April. Archer’s founder expressed some discontentment with Archer’s Board of Directors and his recent selling activity may be a reflection of his own personal situation rather than what’s happening at the company. In total, Brett sold $400,000 worth of shares in July and has continued converting and selling his shares of ACHR stock into October. Whereas, Marc Lore has continued buying shares of ACHR from October 2021 to March 2022. Currently, Lore owns 28,086,358 shares of ACHR stock – roughly 11.6% of the company.
Another risk factor, according to a recent study is the amount of time required for eVOTL manufacturers to develop their products and industry. However, the study did conclude that 20,000 eVOTLs are expected to be sold within the next 13 years and 150,000 within the next 23 years. The authors also expect regulations for these aircrafts to be quite strict. In fact, Kittyhawk, an eVOTL manufacturing company which was backed by one of Google’s co-founders, has recently had to suspend its operations given how tricky the development process has been.
While ACHR stock may hold promise over the long-term as it continues to develop its aircraft, it will likely be a while before the company’s aircraft are widely adopted given the timeline to market. It’s important to remember its upcoming Q3 earnings, its deal with United Airlines, and the unveiling of Midnight which could help bring more volume to the stock.
ACHR Stock Financials
Archer’s finances are also worth keeping an eye on. The company’s operating expenses increased over 100% YoY compared to the same quarter in 2021 due to the general increase in R&D as well as administrative costs. However, this 22.8% increase QoQ was mainly due to a $10.4 million increased investment in its key technology development programs and a $3.4 million severance expense due to the former CEO stepping down.
According to the company’s forecast in Q2, ACHR expects its GAAP operating expenses to increase by $15 to $23 million in Q3. Since ACHR stock typically runs with the company’s EPS beat, its Q3 earnings on November 10th could fall flat if the company is unable to beat estimates as a result of its additional operating expenses.
The company’s EBITDA has fallen from -$63.8 million in Q1 to -$78.3 million in Q2. For Q2 in 2021, ACHR reported -$3.8 million representing a significant increase in the company’s cash burn. However, it’s important to keep in mind that many eVOTL manufacturers are in their early growth phase, so this net loss is not surprising. As for its assets, ACHR reported $654.8 million in cash and cash equivalents while its total liabilities amount to $73 million.
Current EPS estimates for ACHR’s Q3 earnings are -$.40 for GAAP and -$.28 for normalized. It is worth noting, however, that Archer’s actual EPS has outperformed quarterly estimates over the previous two quarters, beating its estimated EPS loss by $.01 in Q2.
@TheDragonOTC believes ACHR stock could pay off as a long term swing
ACHR stock recently formed a new 52-week low at $2.50 and is trading beneath both the 200 and 50 MAs after testing the 200 MA earlier this month. There is the possibility of a golden cross on the 1 hour timeframe occurring in the near future which could signal a trend shift.
The stock has fallen 44% since August despite United Airline’s $10 million deposit with the company. However its worth noting that ACHR stock has seen a run up leading to its earnings calls for the past three earnings. The stock also shows a great deal of volatility due to its relatively low float of 122 million shares which means ACHR stock could run leading up to its earnings or upon its aircraft’s reveal in November.
Overall, accumulation has continued to drop steadily since ACHR’s IPO in 2021, the RSI is holding at 44 and the MACD is bearish to the downside. Considering the bearish sentiment surrounding speculative growth stocks, especially in emerging industries such as eVOTL, ACHR could continue to downtrend. But considering the stock’s performance leading up to its past earnings, the stock’s relatively low float, and the upcoming catalysts in November, as well as the company’s considerable cash on hand, ACHR could be a promising bottomed out penny stock.
ACHR Stock Forecast
Archer is one of few eVOTL manufacturers this late in the development and FAA certification processes. This means that it might not have worthy competitors for a few years – although Joby is in a similar position, it targets longer-distance trips. ACHR has already gone through a management shakeup with its founder and former co-CEO leaving during a critical time for the company.
Despite this, the company could emerge stronger than before as it makes headway in a market expected to be valued at $1 trillion by 2040 according to Morgan Stanley. The increasing issues of traffic, pollution, and obstacles to mobility, could make ACHR a leader if it emerges as the first to market. The company also has a notable lead investor and has already secured up to $1.5 billion in aircraft sales to United Airlines. While ACHR’s long-term potential in this industry presents certain risks to investors, it has two catalysts in November which could make ACHR stock one to watch in the weeks ahead.
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