In November and early December 2024, flying taxi manufacturer Archer Aviation Inc. New York Stock Exchange: ACR Take off – The urban air carrier saw its stock price rise nearly 139% in the month leading up to December 6. As a pioneer in a new, emerging industry, Archer has catalyzed a shift in investor interest. Other companies in the aerospace and defense market may have the potential to benefit as well.
Why does archer rise
Archer Aviation Today
(As of 6/12/2024 ET)
- 52 week range
- $2.82
▼
$9.84
- Price target
- $9.33
Before looking at the industry more broadly, it’s worth taking a moment to explore some of the factors that have contributed to Archer’s recent success. Archer is a member of the burgeoning electric vertical take-off and landing (eVTOL) aircraft field. Earlier this fall, Soracle, a Japanese joint venture between Japan Airlines and Sumitomo Corp., helped spur a rally in ACHR stock when it agreed to buy 100 of the company’s Midnight jets for a total value of up to $500 million.
Stellantis Nevada New York Stock Exchange: STLA He was also a key player in Archer’s success, in which the Netherlands-based car company invested At least $370 million at Archer to assist manufacturing efforts. However, Stellantis CEO Carlos Tavares abruptly resigned on December 1, potentially jeopardizing the company’s support for Archer. This news led to a short sell-off in Archer shares early in the month, although by late the first week of December, investor confidence in the Stellantis arrangement appeared to be increasing again, with shares trending higher again.
Analysts remain bullish on Archer despite all its recent success, setting a consensus price target that remains approximately 22% above current price levels.
What it means for other airlines
Gobi Aviation Today
(As of 6/12/2024 at 05:53 PM ET)
- 52 week range
- $4.50
▼
$9.33
- Price target
- $8.35
One of Archer’s main competitors in the electric helicopter space is Joby Aviation Inc. New York Stock Exchange: Gobiwhich has also seen a recent rise but has been much lower than Archer’s gains. JOBY shares rose nearly 60% in the month ended Dec. 6, but are up only 28% in the past year, after experiencing a high degree of volatility over the summer.
Like Archer, Jobe likely benefited at the end of the year from that New FAA regulations Which will help eVTOLs fly. However, the company’s path toward commercializing its product is not as clear as Archer’s, and it risks losing the first-in-industry perks that any company that can successfully bring an eVTOL aircraft to market faster would likely receive.
The aerospace and defense industry more broadly
Other companies in the broader aviation and aerospace industries have also rallied recently, but not as much as Archer. Elbit Systems Limited Nasdaq: ESLT— One example is a developer of various systems for use in military and commercial aircraft. Elbit shares rose nearly 8% in the month ended Dec. 6, driven by a record third-quarter backlog of $22 billion and $1.7 billion in revenue. However, ESLT shares are up just 20% in the past year, underperforming the broader market during that time frame.
As a defense company, Elbit also sells unmanned aerial systems, munitions and related products; Sales of these products have increased as a result of the ongoing unrest in the Middle East. With a P/E ratio of 1.7, this company may still be undervalued.
Loar Holding Company New York Stock Exchange: Loire This is another example of an aerospace and defense company that saw a modest rise in its stock price in the past month. As with Elbit above, its stock rose about 8% from early November through December 6. Although the company beat analysts’ EPS expectations in its latest earnings report thanks to strong revenue and adjusted EBITDA margins, it revised down some of its forward guidance. In anticipation of higher interest expenses related to recent acquisitions.
Loar shares have performed better in the past year than Elbit shares, rising 84% in that time. However, analysts only rate the stock a Moderate Buy and feel the price could fall 5% based on the consensus price target.
eVTOL aircraft taking off
Electric rotorcraft companies – led most prominently by Archer – appear to be of particular interest to investors as we head into 2025. As the race to commercialization continues, this will undoubtedly continue to be an area to watch closely. Meanwhile, some members of the broader aviation industry have growth potential but appear unable to match Archer’s pace in recent months.
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