Archer Aviation (NYSE:ACHR), which specializes in manufacturing electric vertical takeoff and landing (eVTOL) vehicles, is seeing choppy price action on Tuesday following an initial bump higher. Yesterday, automotive giant Stellantis (NYSE:STLA) announced that it had bought more ACHR stock, signaling confidence in the air mobility firm.
According to its website, Stellantis completed a series of open-market purchases totaling approximately 8.3 million shares of ACHR stock. This acquisition signals confidence in the eVTOL company’s ability to bring its air mobility platform to market beginning in 2025. Notably, the increased investment in Archer follows Stellantis CEO Carlos Tavares’ “recent visit to Archer’s headquarters and manufacturing facilities in Santa Clara, California.”
Back in January of last year, Stellantis announced its intention to mass produce the Midnight aircraft as Archer’s “exclusive contract manufacturer.” This directive would allow Archer to strengthen its path to commercialization by sidestepping several millions of dollars in spending. Further, the first-phase construction of the eVTOL maker’s “high-volume manufacturing facility in Georgia” is still on track to be completed later this year.
Per Stellantis’ press release, the Midnight is “safe, sustainable [and] quiet” and can carry four passengers as well as a pilot. The vehicle is also optimized for short distance trips of around 20 to 50 miles and will have brief charging times about 10 minutes between flights.
ACHR Stock Needs a Lift Following a Momentum Fade
Fundamentally, Archer commands strong potential to help usher in a new industry. According to Precedence Research, the global eVTOL market reached a valuation of $11.15 billion in 2022. Further, experts project that the sector could expand to $35.79 billion by 2032, representing a compound annual growth rate (CAGR) of 12.37%. On paper, that’s a huge positive for ACHR stock.
Nevertheless, Archer is an unproven business and currently pre-revenue. For the current fiscal year, analysts anticipate revenue to reach $2.5 million. What’s more, by 2025, this figure is expected to jump to $70.85 million. Still, this is a major question mark, and may be part of why ACHR stock is down about 20% in the trailing six months.
That said, Stellantis’ investment in Archer represents a significant credibility boost. Stellantis CEO Carlos Tavares believes the eVTOL specialist can help “usher in the next transportation revolution.”
On the other end of the equation, Archer founder and CEO Adam Goldstein believes that the company is “on the cusp of changing the way the world moves in the sky.” Further, the partnership between Archer and Stellantis may realize “a once-in-a-generation opportunity to redefine urban transportation and deliver tremendous value to the world’s cities and our shareholders.”
Stellantis has been a “strategic partner” to Archer since 2020 and an investor since 2021. Per FactSet, the company holds a roughly 15% stake in ACHR stock.
Why It Matters
Currently, analysts rate ACHR stock a unanimous strong buy with an average price target of $10.33 per share. The most optimistic target calls for a price of $12 per share. Notably, the least optimistic target is also $9, which still implies roughly 84% upside potential.
On the date of publication, Josh Enomoto did not hold (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.
