Investors expecting Archer Aviation Inc (NYSE:ACHR) recent cash infusion to lift its price to new highs should think again. The injection is good news and lifts the liquidity position, providing about two years of operational visibility, but does nothing to improve the revenue and earnings outlook. The money shores up the balance sheet and is expected to accelerate the project, but revenue and earnings rely on FAA certification. The certification process is progressing, in the final stages, but slow. Final approval is expected before the year’s end, but there is no guarantee.
Revenue and earnings also rely on production capability, which is improving but not yet ready. The company got the CO for its Covington, GA production facility and hopes to ramp production to 650 aircraft by 2030 but has yet to produce one. As it is, production is expected to begin early this year but faces challenges, including the final assembly of production lines and, of course, regulatory approval.
Investors now face dilution. The cash injection came at a cost of 35.5 million shares. The sales increased the share count by nearly 10% compared to the reported quarter ending September 2024, when shares were up 45% year-over-year. That is a significant headwind for the market, and ample shares are left to sell. The company probably won’t need to do it, but it is far too soon to say for sure.
The Sell-Side Accumulates Archer Stock, But the Upside Is Limited
The sell-side statistics support the share price, including bullish analysts, increasing coverage, and institutional buying. Institutions bought this stock on balance throughout 2024, with activity ramping at year-end and into the first half of Q1 2025.
Buying volume hit a two-year high in Q1 2025, outpacing selling by nearly 6-to-1, and has helped keep ACHR stock price trading near multi-year highs. Buyers include various institutions, including big-name mutual fund and ETF managers, as well as public and private investment capital. They owned nearly 60% of the aerospace stock in mid-February.
However, weak price target conviction among analysts offset the ramping institutional activity. They see this stock rising by 10% at the mid-point, but recent activity presents headwinds for the market. Canaccord Genuity lowered its price target, and JPMorgan Chase (NYSE:JPM) warned that hype in eVTOL was overblown, citing long-term opportunities and near-term challenges. Those challenges are why the short interest remains high and will likely cap gains until later in 2025. Short interest was above 15% at the end of January and is unlikely to have fallen since. The likely scenario is that short-sellers are selling into the rally and increasing their positions.
The Outlook for Archer Aviation Is Robust… In The Long-Term View
Archer Aviation’s near-term results are unlikely to catalyze the market unless the news includes final FAA approval and the commencement of production. However, the longer-term outlook includes revenue, which begins as a trickle in 2025, accelerates sharply in 2026, and is forecasted to run at a moderately high triple-digit pace for the next several years. Adjusted profits are expected before the decade's end.
Archer Aviation: This Market Is Set Up to Fall
The daily charts of Archer Aviation's stock price action are promising, showing a strong upswing and potential for a bullish momentum swing that could take it to new highs. However, the weekly charts present numerous hurdles and a high potential for price pullbacks. The hurdles align with previous price peaks, including those dating back to shortly after the IPO in 2021. They also align with the analyst's consensus price target, which means a move to the consensus may not get much higher. The risk is that short-sellers will pile into the stock at this level and drive it down to critical support targets at $8 or lower.
