Shares of air mobility specialist Archer Aviation (NYSE:ACHR) popped higher on a ringing endorsement by Deutsche Bank analysts. Citing a strong cash balance, Archer enjoys the potential of representing a top pick among manufacturers of electric vertical takeoff and landing (eVTOL) aircraft. Long attracting optimism, options traders, in particular, believe that ACHR stock could double from the present value.
According to a CNBC report, analyst Edison Yu reiterated a top pick recommendation in a Monday note. As well, the Wall Street expert maintained a $12 price target, implying more than 140% upside from last Friday’s close. At the time of writing, ACHR stock gained about 167% since the beginning of the year, symbolizing one of the top market performers.
Even with this already remarkable print, Yu believes that shares have even more room to run based on the financials. Specifically, Archer’s cash balance is strong, and the analyst anticipates that capital will remain robust.
“All in, Archer should have enough runway for about 2 years which should be further supported by payments from the US Air Force and customer deposits,” Yu said, referencing a partnership with the Air Force that will focus on transport, logistics and rescue operations.
Options Traders Bid Up ACHR Stock
In addition, Yu cited that Archer began flying its Midnight aircraft, a significant operational milestone, per InvestorPlace’s Thomas Yeung. As well, Archer plans to launch an air taxi service in the UAE and India, reflecting encouraging progress. It also helps that ACHR stock enjoys a comparative advantage.
To be sure, Yu mentioned that Archer and eVTOL rival Joby Aviation (NYSE:JOBY) stand neck and neck. Certainly, Joby leverages powerful attributes, primarily its partnership with automotive giant Toyota (NYSE:TM). However, the company only carries a consensus hold rating based on one buy and one sell. In contrast, ACHR stock enjoys a unanimous strong buy view, now based on five analyst ratings.
Unsurprisingly, given the context, Archer also attracted the attention of large speculators. According to Fintel’s screener for options flow — which exclusively filters for big block trades likely made by institutions — ACHR stock may potentially benefit from optimistically oriented transactions.
For example, open interest for the Jan 19 ’24 10.00 Call stands at 7,655 contracts. Per data from TipRanks, open interest for this option was only 4,768 contracts on Aug. 7 of this year. Put another way, the smart money has been steadily building its long-side exposure to ACHR stock.
Also, institutional investors bought 502 contracts of the Jan 17 ’25 5.00 Call, reflecting long-term optimism. At the time of the transaction, open interest for the call sat at only 166 contracts. Presently, this metric clocks in at 708 contracts.
Why It Matters
Another factor that could benefit ACHR stock is plain and simple speculation. As InvestorPlace contributor Faisal Humayun pointed out, Archer might rise on a possible short squeeze. Per Fintel, the short interest of ACHR stands at 26.77% of its float.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
