On Tuesday, Needham initiated coverage on Archer Aviation Inc. (NYSE: NYSE:ACHR), giving the urban air mobility company a Buy rating and setting a price target of $11.00. The firm expressed optimism about the company's future, citing the industry's momentum and Archer Aviation's capacity to fulfill its substantial aircraft order book.
The analyst from Needham highlighted that while the timeline for aircraft deliveries and the operation of air taxi networks remains uncertain, the overall industry has begun to advance. The firm's confidence in Archer Aviation is bolstered by the company's approximately $6 billion aircraft order book, which has recently been supported by new modeling guardrails.
The firm also sees potential in the early-stage air taxi market, estimating a revenue opportunity of over $3 billion. This opportunity is based on a conservative estimate of market share in airport and commute travel. Archer Aviation's value proposition is strengthened by its ability to offer shorter trip times compared to current high-end airport travel options.
Archer Aviation is considered a long-term investment, but Needham suggests that short-term catalysts, such as regulatory approvals and the commencement of passenger flights, could increase investor confidence in the company's long-term prospects.
The $11 price target set by Needham is based on 12.5 times the firm's projected adjusted EBITDA for the year 2029, which has been discounted back to present value. The analyst's statement concluded with an emphasis on these financial projections as a basis for the positive outlook on Archer Aviation's stock.
In other recent news, Archer Aviation Inc. has made significant strides in the commercialization of its electric vertical takeoff and landing (eVTOL) aircraft, as revealed in its third quarter 2024 earnings call. The company reported a robust liquidity position with over $500 million in cash reserves. Archer's CEO, Adam Goldstein, outlined plans to expand into key markets such as New York, Los Angeles, San Francisco, Miami, UAE, and Japan.
Additionally, Archer's partnership with Stellantis (NYSE:STLA) has been reinforced, with nearly $300 million received and an agreement for up to $400 million more to support manufacturing efforts. The company is also progressing with the construction of a manufacturing facility in Covington, Georgia, targeting a production rate of two aircraft per month by the end of 2025.
However, Archer's non-GAAP operating expenses for Q3 2024 were $96.8 million, with an expected increase to $95 million to $110 million in Q4 due to higher engineering and manufacturing costs. Despite these costs, Archer continues to receive strong demand for early aircraft delivery, indicating a positive market response.
InvestingPro Insights
Archer Aviation's recent Buy rating from Needham aligns with some of the real-time data and insights from InvestingPro. The company's market capitalization stands at $1.9 billion, reflecting investor interest in its potential. An InvestingPro Tip highlights that Archer holds more cash than debt on its balance sheet, which could provide financial flexibility as it works towards fulfilling its $6 billion order book.
However, investors should note that Archer is currently not profitable, with a negative P/E ratio of -4.24 for the last twelve months as of Q3 2024. This aligns with another InvestingPro Tip indicating that analysts do not anticipate the company will be profitable this year. This is not unusual for a company in the early stages of a capital-intensive industry like urban air mobility.
Despite these challenges, Archer has shown strong recent performance, with a 38.24% price return over the past month. This could reflect growing investor confidence in the company's long-term prospects, as mentioned in the Needham analysis.
For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips for Archer Aviation, providing a deeper understanding of the company's financial health and market position.
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