Archer Aviation’s breakneck progress and brief interest

Archer Aviation NYSE:ACHR, an urban air mobility company, recently announced that three compliant, piloted aircraft are under construction and will be used in FAA “for credit” testing. This is just the latest milestone for the company that signals its success in executing its commercialization plans.

This little-known company has an ambitious goal: to transform urban travel.

As the company makes strides, some have started to take notice. A high price target and significant short interest tell the story of a growth stock in its early stages. But with a market capitalization of $1.48 billion and average daily volume of 3.9 million shares, it has already gathered a following.

So, what exactly does this innovative industrial aerospace company do? And should you keep an eye on it in the future for a potential investment? Let’s take a closer look.

What is Archer Aviation?

Archer Aviation Inc. is an urban air mobility company specializing in the design, development, manufacturing and operation of electric vertical take-off and landing passenger aircraft. Founded in 2018, the company, initially known as Atlas Crest Investment Corp., is headquartered in San Jose, California.

The company’s Midnight aircraft is electrically powered and equipped with six independent battery packs, each supporting a pair of electric motors. It boasts a range of up to 100 miles, ideal for urban trips covering 20-50 miles, with speeds reaching up to 150 mph, significantly reducing travel times.

The aircraft can comfortably accommodate a certified pilot and up to four passengers with luggage. It also has fast-charging capabilities, allowing for consecutive 20-mile flights with only about twelve minutes of charging in between. Additionally, its low direct operating costs aim to make it competitive with land-based ride-sharing options.

Strategic partnerships with Stellantis and United

Archer, as mentioned on its website, is consistent in working towards achieving its commercialization strategy. That’s why the company has partnered with established players like United and Stellantis in adjacent industries.

In 2021, United became the company’s first customer and marquee partner by entering into a purchase agreement for up to $1.5 billion in aircraft sales. Most recently, in early 2023, the two companies announced plans to launch the first air taxi route in Chicago, between O’hare International Airport and Vertiport Chicago.

In 2021, Archer and Stellantis established a collaboration, which evolved into a partnership with significant progress made in the following years. By 2022, they completed seven engineering projects focused on various aspects of high-volume composite manufacturing, battery development, and prototype development, among others.

Stellantis also provided key input during the manufacturing site selection and design process. In 2023, Archer and Stellantis announced a joint effort to produce Archer’s flagship eVTOL aircraft, Midnight. Stellantis is committed to providing advanced manufacturing technology, expertise, people and capital to enable large-scale aircraft production.

This partnership includes up to $150 million in equity capital from Stellantis, with the goal of exclusively mass producing Archer’s eVTOL aircraft.

Analysts see significant upside

The company has a higher analyst consensus rating than the average rating for aerospace and defense stocks, Moderate Buy, and the S&P 500 consensus rating, Hold. ACHR, based on five analyst ratings, has a consensus buy rating.

Notably, the consensus price target for ACHR is $9.60, predicting nearly 100% upside for the stock. The low-end price target of $8, set by JPMorgan analysts, also calls for significant double-digit upside. The maximum forecast, provided by Benchmark analysts, is 12 dollars, which foresees a triple-digit increase.

High short interest

As of January 15, short-term interest in Archer Aviation shares stood at 21.96% of the float, marking an increase of nearly half a percentage point from the previous month. With over 39 million shares sold short, the stock’s average daily trading volume of 3.9 million shares raises concerns from both a supply-demand and liquidity perspective, especially if shares were to trade higher .

This substantial short interest suggests a significant level of pessimism among investors regarding Archer Aviation’s current valuation and future performance, potentially leading to greater share price volatility in the future.

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