Wheels Up Closes $332 Million Revolving Financing Facility, Acquires 17 Embraer Phenom 300 Series Aircraft

Archer Aviation Inc. ACHR recently announced its third-quarter 2024 results, highlighting some noteworthy progress in introducing its Midnight electric vertical take-off and landing (eVTOL) aircraft in the commercial market. Impressively, the company established a consortium in the United Arab Emirates (UAE) during the third quarter, which paved its way toward launching its commercial air taxi services in the nation during the fourth quarter of 2025.

Moreover, in September, ACHR revealed that it has signed an agreement with Japan Airlines and Sumitomo Corporation’s joint venture, Soracle, which includes a planned purchase of up to $500 million worth of its Midnight aircraft. This agreement brought Archer Aviation’s indicative order book to more than $6 billion, indicating solid revenue generation prospects for the company in the future.

This might lure investors interested in eVTOL manufacturers to add ACHR stock to their portfolio. However, before making any hasty decision, it would be prudent to take a look at how ACHR has performed so far in terms of share price return, the stock’s long-term prospects as well as risks (if any) to investing in the same. This would help investors make a more insightful decision.

ACHR Stock Underperforms Its Industry, Sector & S&P500

Archer Aviation’s shares plunged a dismal 30.3% in the year-to-date period, underperforming the Zacks Aerospace-Defense industry’s loss of 4.1% as well as the broader Zacks Aerospace sector’s gain of 4.4%. It also came short of the S&P 500’s return of 26% in the same time frame.

On the contrary, stellar performance can be seen in the share price return of other industry players like Embraer ERJ, RTX Corp. RTX and L3Harris Technologies LHX, which have witnessed surges of 112.4%, 47.1% and 24.2%, respectively, in the year-to-date period.

ACHR YTD Performance

What Led to ACHR Stock’s Downfall?

To date, Archer Aviation has not been able to generate any revenue as it continues to design, develop and seek the governmental approvals necessary for its Midnight eVTOL aircraft to enter into service. It has also been incurring significantly increasing operating expenses as it progresses toward the certification, manufacturing and successful delivery of its eVTOL jets. Evidently, ACHR’s adjusted operating expenses increased 44.7% year over year in the third quarter.

ACHR has been incurring significant operating losses due to such high operating expenses. This might have been a primary reason behind investors losing confidence in this stock lately.

The company’s cash flows from operating activities have also been reflecting dismal performance in the past couple of quarters as ACHR continues to make cash investments to support the growth of its research and development activities related to its eVTOL aircraft and the general and administrative functions necessary to support such activities. At the end of the third quarter, ACHR’s cash outflow from operating activities amounted to $264.2 million compared with $187.6 million a year ago.

Will ACHR Stock Recover Anytime Soon?

Once Archer Aviation starts delivering its eVTOL aircraft to its customers, we may expect the company to make notable revenue generation. Following the Federal Aviation Administration’s (FAA) finalized Midnight jet’s airworthiness criteria in May 2024, Archer is now nearing completion of Phase 3 of the FAA’s 4-phase type certification process while continuing to rapidly advance through Phase 4, the final phase to secure type certification.

A quick sneak peek at ACHR’s near-term earnings estimates reflects the same.

ACHR’s Upbeat Estimates

The Zacks Consensus Estimates for fourth-quarter and full-year 2024 earnings indicate a year-over-year improvement. The estimate for 2025 also mirrors a similar improvement.

The estimates for fourth-quarter 2024 and full-year 2025 reflect upward revision, which indicate enhanced investor confidence in this stock.

ACHR’s Low Debt-to-Capital

Archer Aviation’s current total debt-to-capital ratio is 8.92X, which is quite lower than its industry’s 55.28X. This indicates that the company is financially less leveraged than its industry.

Risks to Consider Before Choosing ACHR Stock

Despite offering some solid near-term prospects, it’s uncertain whether ACHR can sustain growth in the long run. The market for eVTOL aircraft is still in a nascent stage. Hence, ACHR’s success in this market doesn’t just depend upon its ability to effectively design, develop and certify eVTOL aircraft, but also on how the demand for eVOTL evolves with time.

If the majority of the public does not recognize unmanned aircraft as an alternative to existing methods of public transport, as a result of concerns regarding safety, noise and affordability, the growth potential for ACHR will remain limited over the long run.

Moreover, aerospace manufacturers like ACHR are currently facing several industry challenges like supply-chain issues, rising jet fuel prices and a shortage of skilled labor. One should consider the fact that ACHR might face a delay in completing its aforementioned work. Any significant delay in obtaining FAA certification will likely require the company to raise additional capital above its existing cash on hand. This, in turn, might also delay its generation of revenues.

What Should Be Your Stance?

To summarize, investors interested in Archer Aviation can buy this stock now, considering the upward revision in its earnings estimates, strong progress toward commercial launch of its Midnight eVTOL as well as low leverage. It has been historically observed that low-leverage stocks are less likely to disappoint their investors in times of crisis.

The company’s Zacks Rank #2 (Buy) also supports our investment thesis. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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