Analysts Lift Archer Aviation Stock Despite Earnings Miss
Archer Aviation Inc. (NYSE: ACHR) stock is up 5% in early trading the day after the company reported its fourth-quarter earnings. The move reversed an 11% drop in after-hours and pre-market trading when the report dropped.
The likely reason for the initial sell-off was that Archer delivered weak headline numbers at a time when speculative investors were in a sell-first and ask-questions-later mood. However, a key reason for the reversal may have come from bullish analyst sentiment, which came in before the market opened. That raises the question, is this a time to buy the stock, or are investors getting a relief rally before the stock takes another leg down?
To answer that question, it’s important to look beyond the headline numbers, which showed a 15% year-over-year (YoY) increase in operating expenses from $107.30 million to $124.20 million. The company had been preparing investors for that increase, noting that it was spending more on testing efforts and finishing the build of its production facility in Covington, GA.
What If Archer Fails to Deliver?
The existential question that investors have to ask is will the company be able to bring its Midnight eVTOL (electric vertical take-off and landing) vehicle to market in a meaningful way? The company would argue in the affirmative.
Archer is in the final stage of the Federal Aviation Administration (FAA) regulatory process. While approval is not guaranteed, Archer achieved another key milestone in late February when the FAA gave the company the go-ahead to launch its pilot training academy. This academy will train personnel in preparation for commercial services.
Furthermore, the company has partnerships with Southwest Airlines Co. (NYSE: LUV) and United Airlines Holdings Inc. (NASDAQ: UAL), which will help facilitate mobility networks in Los Angeles and San Francisco. It also announced that Abu Dhabi Aviation, the Middle East’s largest commercial helicopter operator, plans to deploy the first of the company’s flying taxis later in 2025.
To top it off, Archer now has approximately $1 billion on its balance sheet because of a $301.80 million capital raise in February. That will be enough for the company to start production.
Analysts Are Prepping for Launch
Since the earnings report, several analysts have reiterated their bullish ratings and price targets. The Archer Aviation analyst forecasts on MarketBeat show that Canaccord Genuity Group, HC Wainwright, and Needham & Company all reiterated their Buy ratings on the stock, and two of three raised their price targets.
But what makes the price targets more bullish is that each of the price targets is above the consensus target of $11.56, which is 32.6% higher than the stock’s price as of this writing.
Conviction in ACHR Stock May Be Rewarded
It’s been a rough start to 2025 for shareholders. This week's drop of over 13% has extended the year-to-date loss to over 18%. Short interest remains high at over 15% of the stock’s float.
Even after this week’s price action, ACHR stock is up 68% in the past 12 months, which makes it a top performer among aerospace stocks. And for a company with minimal revenue and negative earnings, it’s not surprising that the bears are in control.
That means that retail investors may not want to fight the trend, and ACHR stock may have further to fall. That's the reality of investing in speculative stocks like Archer. However, if investors are convinced that the company will be able to commercialize its flying cars successfully, this is a good time to buy ACHR stock.
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