Archer Aviation's sky-high progress and short interest

Archer Aviation NYSE: ACHR, an urban air mobility company,  recently announced that three conforming, 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 a lofty goal: to transform urban travel.

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

So, what exactly does this innovative industrial aerospace company do? And should you have it on watch going forward for a potential investment? Let’s take a closer look.

What is Archer Aviation?

Archer Aviation Inc. is an urban air mobility firm specializing in designing, developing, manufacturing, and operating electric vertical takeoff and landing aircraft for passenger transportation. Established in 2018, the company, known initially as Atlas Crest Investment Corp., is based in San Jose, California.

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

The aircraft accommodates a certified pilot and up to four passengers with luggage comfortably. It also features rapid charging capabilities, allowing for consecutive 20-mile flights with only approximately twelve minutes of charging time in between. Furthermore, its low direct operating costs aim to make it competitively priced compared to ground-based ride-sharing options.

Strategic partnerships with Stellantis and United

Archer, as mentioned on its website, is steadfast in working toward 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 flagship partner as it entered into a purchase agreement for up to $1.5 billion in aircraft sales. More 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 subsequent years. By 2022, they completed seven engineering projects focused on various aspects of high-volume composite manufacturing, battery development, and prototype part development, among others. 

Stellantis also provided crucial input during the manufacturing site selection and design process. In 2023, Archer and Stellantis announced a joint effort to manufacture Archer's flagship eVTOL aircraft, Midnight. Stellantis committed to contributing advanced manufacturing technology, expertise, personnel, and capital to enable large-scale aircraft production. 

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

Analysts see significant upside

The company has a higher consensus analyst 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, forecasting a nearly 100% upside for the stock. Even the low-end price target of $8, placed by analysts at JPMorgan, forecasts a significant double-digit upside. The high forecast, given by analysts at Benchmark, is $12, which forecasts a triple-digit upside.

High short interest

As of January 15, the short interest in shares of Archer Aviation stood at 21.96% of the float, marking a nearly half a percent increase compared to 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, mainly if shares were to trade higher. 

This substantial short interest suggests a notable level of pessimism among investors regarding Archer Aviation's current valuation and future performance, potentially leading to heightened volatility in the stock price going forward.