‘Keep Your Helis Grounded,' Says Barclays About Archer Aviation Stock

Business Insider

2 days ago

Archer Aviation (NYSE:ACHR) has captured Wall Street's attention over the past year, with shares soaring 231% amid growing optimism around its eVTOL progress. Revenue generation is approaching, piloted test flights are on the horizon, and the company is set to launch operations in the UAE by year's end.
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Backing this momentum is Archer's solid financial foundation, with approximately $1 billion in cash reserves providing the runway to support upcoming milestones and strategic initiatives.
One such initiative is an eye-catching partnership: Archer has been selected as the exclusive Air Taxi OEM for the LA28 Olympic and Paralympic Games and will serve as the official and sole eVTOL sponsor for Team USA.
Such has been the positivity that even a short seller report was unable to seriously dent sentiment, with investors swiftly brushing off the various accusations.
Barclays analyst David Zazula says the report had a 'bizarre focus' on the company's paid sponsorship of the 2028 Olympic Games – an initiative commonly pursued by consumer-focused companies and one that could be financially beneficial if Archer successfully offers air transport services during the event.
Addressing accusations that Archer misrepresented the status and progress of its aircraft assembly and testing phases, Zazula recognizes that prototype aircraft often need to be disassembled during testing, particularly modern models with numerous data connections. That said, the analyst does think that the reported modifications to the aircraft's configuration merit attention, especially with the upcoming deliveries of the 'Launch Edition' models on the horizon.
The report also pointed out slow progress in Archer's efforts to obtain FAA type certification – advancing just 2% in the first quarter, according to the company's own metric. Archer attributed this delay to the absence of FAA guidance on how to address a loss of propulsion scenario. Management has since indicated that, with that issue resolved, most of the remaining compliance requirements should be manageable. However, Zazula thinks it's worth noting that the 'administrative requirements associated with unlocked testing are likely to be substantial.' Basically, Zazula thinks there remains a lot of uncertainty regarding the timing of FAA certification.
Separately, Archer announced partnerships with Palantir to develop AI solutions for manufacturing and infrastructure, and with Anduril to create hybrid aircraft for defense use in the U.S. and U.K. Based on Zazula's experience with the Department of Defense, he believes these contracts will likely advance slowly, especially given that defense programs often prioritize range and operational flexibility.
All in all, while Archer's ambition and momentum are clear, Zazula adopts a wait-and-see approach.
'Given the reliance of Archer's plan on near term revenues from international sales, we believe more clarity is needed on certification progress with the respective regulators to support current stock levels,' Zazula summed up.
Reflecting that cautious stance, the analyst rates ACHR stock an Equal Weight (i.e., Neutral), along with a $4.50 price target – implying a steep 54% downside from where shares currently trade. (To watch Zazula's track record, click here)
The rest of Wall Street leans more optimistic, with 4 Buys and 2 Holds combining for a Moderate Buy consensus. At $10.92, the average target factors on one-year gains of 12%. (See ACHR stock forecast)
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