Archer Aviation (NYSE:ACHR) saw its stock plunge last week following its third-quarter earnings report and the unexpected announcement of acquiring Hawthorne Municipal Airport in Los Angeles for $126 million. The earnings showed a narrower-than-expected loss, but investors focused on the dilution from a share sale to fund the deal and ongoing cash burn concerns.
Shares dropped nearly 20% on Thursday, erasing all the gains accumulated since April when the stock traded around $4 per share. The current price around $8.45 marks a 42% decline from its 52-week high of $14.62 hit last month, and a 13% drop year-to-date. Despite this, Archer’s stock remains up 163% over the past 12 months, reflecting optimism in the electric vertical takeoff and landing (eVTOL) sector.
Yet after a Raymond James analyst reiterated his buy rating on Friday, the shares bounced 3% yesterday, though he also trimmed the price target by $1 to $13 per share. With the stock now trading well below analyst targets, is this dip making Archer Aviation too cheap to ignore?
Weighing the Analyst’s Take on Archer
Analyst Savanthi Syth reiterating his buy recommendation highlights Archer’s progress toward certification and commercialization, but the price target cut reflects tempered expectations amid higher spending. He praised the Hawthorne acquisition as a strategic move to secure a key vertiport hub in a high-demand market like L.A., potentially accelerating route launches.
However, the analyst also noted risks from elevated capital needs, with Archer’s cash position at $1.6 billion after earnings, but projected a cash burn of $400 million to $500 million annually until revenue ramps up.
Among the benefits of Archer’s business is its partnerships, such as with Stellantis (NYSE:STLA) for manufacturing and United Airlines (NASDAQ:UAL) for orders, positioning it ahead in scalability. Critics argue the analysis overlooks execution hurdles, such as FAA delays, which could push back anticipated 2026 commercial launches.
Overall, the buy call aligns with a consensus strong buy from seven analysts, with an average target of $11.81 per share implying 40% upside from current levels. Yet, relative to peers, Archer’s valuation at 10x forward sales seems reasonable though not undervalued given the uncertainties it faces.
Buying an Airport vs. Buying an Air Taxi Service
Archer’s Hawthorne acquisition aims to build infrastructure for its Midnight aircraft, turning the airport into a dedicated eVTOL hub with charging and maintenance facilities. This $126 million cash-and-stock deal secures a prime location near urban centers, potentially cutting operational costs and enabling quicker market entry in California.
In contrast, Joby Aviation (NYSE:JOBY) acquired Strata Critical Medical‘s (NASDAQ:SRTA) (formerly Blade Air Mobility) passenger business in August for up to $125 million, focusing on customer acquisition rather than physical assets.
Blade brings an established network of terminals, loyal flyers in New York and Europe, and charter expertise, allowing Joby to integrate its eVTOLs into existing routes seamlessly. Joby’s move emphasizes demand generation and revenue synergy, with Blade’s brokerage adding immediate bookings potential.
Archer’s bet is more capital-intensive and infrastructure-heavy, risking delays from regulatory approvals at Hawthorne, while Joby’s acquisition offers faster monetization through Blade’s app and partnerships. Both deals, similar in cost, underscore sector consolidation, but Joby’s appears more immediately accretive, contributing to its 92% year-to-date stock gain versus Archer’s decline.
Key Takeaway
In light of Archer’s planned commercial services launch next year, the recent sell-off may indeed make the stock too cheap to ignore. With FAA type certification on track for 2026 and over $1 billion in order backlog, Archer’s fundamentals remain solid despite short-term volatility.
Trading at a discount to peers like Joby, Archer Aviation offers high-reward potential for risk-tolerant investors betting on urban air mobility’s takeoff.
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