Why Archer Aviation Is On Investors’ Radar Today

Archer Aviation (ACHR), the San Jose based eVTOL aircraft developer, is drawing fresh attention after recent share price moves, with the stock closing at US$5.74 and showing mixed returns over the past year.

Recent trading has been choppy, with a 1 day share price return of 2.5% and a 30 day share price return of 11.0% set against a year to date share price decline of 29.4% and a 1 year total shareholder return decline of 32.3%, while the 3 year total shareholder return remains very large.

If Archer’s swings have your attention, it can be useful to see what else is moving in related themes and uncover 34 robotics and automation stocks

With Archer posting rapid revenue growth from a small base, a sizeable net loss of US$618.2 million, and trading at a large discount to one estimate of intrinsic value, is this a genuine opportunity, or is the market already pricing in future growth?

Most Popular Narrative: Fairly Valued

Archer’s last close at $5.74 sits well below one narrative’s fair value, creating a wide gap between the current share price and that storyline.

ACHR, or Archer Aviation, is a company that has lately been overlooked but at the same time is heavily owned by ETFs. ACHR is currently year to date down 1.58%. The company has received some attention from the media in the past several months, during which the share price increased 199%. The reason I expect this company to continue to move and push forward is several of its recent major contracts with the Department of Defense (DOD). ACHR has locked in a position with the U.S. government through fixed-term contracts. This means it will periodically receive lump sums of money from the government for its services. The company is showing mixed signals in the charts, including bullish long-term hammers and short-term bearish indicators. In my view, these should not be overemphasized. It may not be today or tomorrow, but when the company releases its quarterly reports, momentum could return.

Curious what return profile, revenue ramp, and profit margins could justify such confidence in a young, loss-making eVTOL player? The full narrative spells out those assumptions in detail.

Result: Fair Value of $0.00 (ABOUT RIGHT)

However, you still need to watch for setbacks on key Department of Defense contracts or for a slower revenue ramp from the current US$0.3 million base.

Another Angle On Valuation

The SWS DCF model suggests a very different story, with an estimated future cash flow value of $27.20 per share versus the current $5.74 price. This implies that Archer is trading well below that model’s fair value. The big question for you is whether those long term cash flow assumptions feel realistic.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Archer Aviation for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 51 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

With such a mixed picture, do you feel the current mood around Archer really lines up with the facts, or is the story more balanced than it seems? Take a closer look at the trade off between potential upside and the issues investors are worried about by checking the 2 key rewards and 4 important warning signs

Looking For More Investment Ideas?

If Archer has you thinking about what to do next, do not stop here. The right watchlist comes from comparing several clear, data driven ideas side by side.

• Spot potential value opportunities early by scanning 51 high quality undervalued stocks that pair quality fundamentals with pricing that may not fully reflect them yet.
• Focus on resilience first by checking 74 resilient stocks with low risk scores that aim to limit unpleasant surprises when markets turn suddenly.
• Hunt for under followed opportunities by reviewing the screener containing 25 high quality undiscovered gems that many investors may not be watching closely yet.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.