Archer Aviation Stock Soars 12% on Boeing-Backed Expansion

Archer Aviation Inc.’s ACHR shares jumped 12% on Monday on its agreement to acquire The Boeing Company’s BA Wisk Aero, Insitu and SkyGrid subsidiaries. The transaction is expected to add more than $200 million in annual revenue through Insitu, which already operates a profitable defense business across 35 countries. Boeing will also take a strategic stake in Archer and collaborate with it on technology, strengthening Archer’s position across autonomous aviation, defense and air mobility.

The electric vertical takeoff and landing (eVTOL) aircraft maker, however, reported a second-quarter loss of 25 cents per share, in line with the Zacks Consensus Estimate. The company reported second-quarter revenue of $5 million, up sharply from $1.6 million in the prior quarter and exceeding the Zacks Consensus Estimate of $1.95 million. The rally reflected investors’ focus on the company’s strategic expansion and stronger-than-expected revenue rather than its near-term profitability.

Investors also appeared encouraged by Archer’s operational progress. The company said its Midnight aircraft completed piloted city-to-city flights and is preparing for operations later this year under the White House’s eVTOL Integration Pilot Program. Archer ended the quarter with $1.56 billion in cash, cash equivalents and short-term investments, providing significant funding for certification, testing and production. Although the company posted a $263.2 million net loss and expects another adjusted EBITDA loss of $170-$200 million in the third quarter, investors appear increasingly focused on Archer’s expanding revenue opportunities and progress toward commercialization.

Comparison With Peers

ACHR, which currently carries a Zacks Rank #2 (Buy), is part of the Zacks Aerospace - Defense industry. So is BA, which carries a #3 (Hold). ACHR’s shares have declined 16.8% year to date against 6.8% growth for the industry. Boeing and Embraer S.A. EMBJ, two of ACHR’s peers from the same industry, have gained 7.2% and 14.6% in the same period, respectively. EMBJ also carries a Zacks #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Bottom Line

Archer’s sharp stock rally reflects investor optimism over its Boeing-backed expansion, stronger-than-expected revenue and progress toward eVTOL commercialization. Despite a second-quarter loss and continued cash burn, the acquisition of Wisk Aero, Insitu and SkyGrid could diversify Archer’s revenue base and strengthen its position in autonomous aviation, defense and air mobility.

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This article originally published on Zacks Investment Research (zacks.com).

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