Archer Aviation shares attract major financial institution coverage

It has been a painful rough and tum­ble time for those eVTOL com­pa­nies list­ed on the world’s stock mar­kets. Share prices are down, investors are down, where belief and faith in this nascent indus­try is being sore­ly test­ed.

Yet, the last few weeks some­thing has changed to offer hope to share­hold­ers’ break­ing hearts, par­tic­u­lar­ly for those who hold an invest­ment in Archer Avi­a­tion. Final­ly, some eVTOL com­pa­nies are being tak­en seri­ous­ly by the finan­cial mar­kets and viewed as a promis­ing long-term hold.

The respect­ed finan­cial insti­tu­tion, J.P. Mor­gan, released an investors’ note on April 28th, stat­ing the com­pa­ny was ini­ti­at­ing cov­er­age on the Archer stock with an over­weight rec­om­men­da­tion and a 2022 year-end process tar­get of USD7.

Mar­ket relief was pal­pa­ble. The share price shot up like a coiled spring, ris­ing 20 per­cent on that day, more out of exu­ber­ance than on the back of any sage advice. Unfor­tu­nate­ly, it duly dropped again some days lat­er.

For last Sep­tem­ber Archer came to mar­ket via a SPAC with Atlas Crest Invest­ment Corp after first reduc­ing the ini­tial pro-for­ma enter­prise val­ue of USD2.7 bil­lion to USD1.7 bil­lion. List­ing on the New York Stock Exchange under the tick­er sym­bol ACHR, the price opened at USD10. Fol­low­ing a brief flir­ta­tion at USD10.72, the price has been spi­ralling down­wards ever since, hit­ting a 52 week low of USD2.61 in Feb­ru­ary. Present­ly, it has lost over 60 per­cent of its ini­tial share val­ue.

Yet, it is not all doom and gloom.

Deutsche Bank, anoth­er insti­tu­tion­al heavy-hit­ter, agrees with J.P. Mor­gan. Research Ana­lyst, Edi­son Yu, after com­par­ing Archer with its two main rivals, Joby (JOBY) and Ver­ti­cal Aero­space (EVTL), con­clud­ed last month that ACHR is “best posi­tioned to dom­i­nate the emerg­ing indus­try”, award­ing Archer a “buy” rat­ing and a USD10 price tar­get, while giv­ing Joby and Ver­ti­cal only a “hold.”

Yu told flyingmag.com, ”Archer’s shares are trad­ing at a lev­el that doesn’t give them cred­it for what they’ve done and what I think they will do.” Adding, “Once investors realise that, the stock price will rise.”

His enthu­si­asm for this future indus­try was high­light­ed when he remarked, “Urban Air Mobil­i­ty has the poten­tial to essen­tial­ly replace tra­di­tion­al heli­copters.” There­fore, it seems that a con­sen­sus is form­ing on Wall Street that air taxis are “the real thing” and Archer is an impor­tant stock to own.

Edi­son Yu

The prag­ma­tist might remain on the fence for now point­ing to the three com­pa­nies propen­si­ty for burn­ing cash at a fre­net­ic pace. Archer alone spent more than USD110 mil­lion last year, but as suc­cess­ful entre­pre­neurs may point out, this is all part of build­ing a major new busi­ness mod­el and thanks to the mar­ket floata­tion, Archer has a big cash hoard to cush­ion these loss­es (USD724 mil­lion, net of debt).

Mean­while, it would be poor form not to men­tion anoth­er sup­port­er of Archer’s shares, none oth­er than the infa­mous Cathie Wood, port­fo­lio man­ag­er of ARKQ and ARKX.

She has been pur­chas­ing Archer equi­ty for both funds since the com­pa­ny float­ed. Up until recent­ly, 37 sep­a­rate tranch­es. Wood had already bought 5.737 mil­lion shares by the end of last year, but in the first quar­ter of 2022 added an addi­tion­al 5.568 mil­lion or a 98 per­cent increase to her hold­ing. Wood’s stake in March lay at 11,306,020 shares, worth, even with such a present low­ly share price, at well over USD30 mil­lion.

And it is not just Archer share­hold­ers who should be rejoic­ing. Joby is also gain­ing the plau­dits. Anoth­er Wall Street heavy­weight, Mor­gan Stan­ley, has giv­en the eVTOL com­pa­ny an “over­weight” rat­ing, mean­ing its stock is expect­ed to per­form bet­ter in the future and beyond oth­ers in the mar­ket sec­tor, set­ting an ebul­lient share tar­get price of USD16. 

Cathie Wood

This enthu­si­asm has been sup­port­ed by finan­cial web­site, seekingal­pha, a for­mer eVTOL scep­tic, who recent­ly told its read­ers to BUY Joby shares for a long-term hold. And not to be out­done, Ver­ti­cal Aero­space was award­ed a HOLD by Deutsche Bank last month with a short-term price tar­get of USD9.

So, peer into a crys­tal ball or time-trav­el in your mind palace to 2024 and ask your­self this ques­tion. Do I equi­ty stick or twist this year? As the great stock mar­ket investor, War­ren Buf­fett, says, “Be fear­ful when oth­ers are greedy. Be greedy when oth­ers are fear­ful.”

For is the eVTOL reced­ing share-tide soon to turn? The evi­dence ten­ta­tive­ly sug­gests this.

(Do your own research and due dili­gence before pur­chas­ing any stock)

For more infor­ma­tion

https://www.archer.com