Archer Aviation Inc. (ACHR) in Palo Alto, Calif., is an aerospace company that is focused on designing and developing electric vertical takeoff and landing aircraft in urban air mobility networks. Its product, named Maker, is a full-scale electric aircraft capable of traveling at speeds of up to 150 miles per hour. However, ACHR’s stock has declined 59.4% in price over the past nine months and 60.6% over the past year to close the last trading session at $4.02. In addition, it is currently trading 62.5% below its 52-week high of $10.72, which it hit on June 9, 2021.
The world is moving toward a sustainable aviation future with the introduction of electric aircraft. Many companies and startups are vying to grab a piece of the pie in the highly lucrative emission-free commercial aircraft industry.
However, not all companies are well-positioned to capitalize on the industry’s potential growth because they face lengthy certification and technology challenges. Thus, financially weak and incompetent companies in this space, such as ACHR, might struggle to stay afloat. Suffice to say, we think ACHR’s near-term prospects look bleak.
Here is what could influence ACHR’s performance in the upcoming months:
Disappointing Financials
ACHR’s operating expenses increased 1,356.5% year-over-year to $358.3 million for its fiscal year ended Dec. 31, 2021. The company’s net loss and comprehensive loss widened by 1,302.4% year-over-year to $347.8 million. Also, its loss per share widened 540.8% year-over-year to $3.14.
Low Profitability
ACHR’s trailing-12-month ROCE, ROC, and ROA are negative compared to the 3.68%, 6.88%, and 5.15% respective industry averages.
POWR Ratings Reflect Bleak Prospects
ACHR has an overall D rating, which equates to Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. ACHR has an F grade for Growth, which is consistent with analysts’ expectations that its EPS will remain negative in fiscal 2022 and 2023.
Furthermore, the stock has a D grade for Quality, which is in sync with its negative ROA compared to the 5.15% industry average.
ACHR is ranked #72 out of 75 stocks in the C-rated Air/Defense Services industry. Click here to access ACHR’s ratings for Value, Momentum, Stability, and Sentiment.
Bottom Line
Electric aircraft are set to play a prominent role in the sustainable aviation future globally. However, ACHR is not well-positioned to capitalize on the industry’s growth prospects. Despite its stock trading below $5, ACHR’s poor financials and lower-than-industry profitability we think make it best avoided now.
How Does Archer Aviation Inc. (ACHR) Stack Up Against Its Peers?
ACHR has an overall POWR Rating of D, which equates to a Sell rating. Therefore, one might want to consider investing in other Air/Defense Services stocks with an A (Strong Buy) or B (Buy) rating, such as Moog Inc. (MOG.A), Ducommun Incorporated (DCO), and Lockheed Martin Corporation (LMT).
What To Do Next?
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ACHR shares fell $4.02 (-100.00%) in premarket trading Tuesday. Year-to-date, ACHR has declined -33.11%, versus a -6.34% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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