10 hours ago
‘Padding the Coffers Ahead of Lift Off,' Says Canaccord About Archer Aviation Stock
Archer Aviation (NYSE:ACHR) may have ruffled some feathers with news of dilution, but raising capital is often a necessary step – especially, pardon the pun, for companies looking to get projects off the ground.
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As it prepares to participate in the White House's newly announced eVTOL Integration Pilot Program (eIPP), Archer last week announced an $850 million private placement. It raised $817.1 million in net proceeds by selling 85 million shares of Class A common stock to institutional investors at $10 per share. The offering should lift Archer's cash reserves to around $1.8 billion – among the highest in the industry – based on its 1Q25 ending balance. The new funds are expected to support accelerated manufacturing and certification efforts tied to the eIPP.
Canaccord analyst Austin Moeller thinks Archer's 'timely capital infusion' underscores the significance of Trump's executive order aimed at fast-tracking eVTOL deployment in the U.S. The eIPP, a key provision within the Unleashing American Drone Dominance EO, establishes a training program to showcase five U.S.-based eVTOL or UAM (urban air mobility) projects on an 'accelerated timeline' ahead of the 2028 LA Olympics. The Department of Transportation has 180 days to select the five aircraft designs.
While dilutive and likely to raise questions about cash use, Moeller points out that the capital raise 'financially positions Archer Aviation to be a leader in US eVTOL aircraft deployment at key US airports (Newark, Chicago O'Hare) via the eIPP, in addition to providing a substantial capital backstop as manufacturing operations ramp in Covington, GA, for both commercial eVTOL passenger aircraft and hybrid-VTOL tactical drones.'
With an estimated FY25 cash burn of around $466 million, Archer now has a 'significant runway' to scale up manufacturing over the next few years, which should also pave the way for revenue or cash deposits from its international 'Midnight Launch Edition' program.
Meanwhile, on Monday Archer announced that it has partnered with PT. Industri Ketahanan Nasional (IKN) to deploy an initial fleet of its Midnight aircraft in Indonesia, the third country tapped for its 'Launch Edition' program. Archer has previously announced Launch Edition deployments in the UAE through a partnership with Abu Dhabi Aviation, and in Ethiopia via Ethiopian Airlines.
Against this backdrop, Moeller rates ACHR shares a Buy, although to account for the equity dilution, his price target goes from $13.5 to $13. Still, there's a potential upside of 25% from current levels. (To watch Moeller's track record, click here)
3 other analysts also take a bullish stance on ACHR and with an additional 2 Holds, the stock claims a Moderate Buy consensus rating. The average target clocks in at $11.75, implying shares will post growth of 13% in the months ahead. (See ACHR stock forecast)
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