Archer Aviation’s stock price plummeted 14% after announcing an $850 million direct stock offering priced at $10 per share. The fresh capital will support the company’s growth and certification plans, but it also poses a risk of dilution to existing shareholders.
The air taxi maker has seen significant growth over the past year, with its shares more than tripling due to bullish catalysts such as FAA Type Certification and partnerships in the Middle East. Archer is pushing towards this certification, which is essential for US commercial operations, while accelerating efforts overseas. The company also recently reaffirmed plans to launch piloted flights in Abu Dhabi by year’s end.
However, not everyone is optimistic about the stock. One investor, Deep Value Investing, believes that the recent hype has outpaced reality and warns against buying into it. They point to Archer’s significant lag behind industry peer Joby in the race for Type Certification and its hefty cash burn of $376 million over the past 12 months.
Deep Value Investing also questions whether the market is pricing in enough fundamentals before making a decision. The investor notes that the Abu Dhabi launch may be already factored into the stock price, but they doubt that the enthusiasm will last until Archer’s first piloted flight gets cleared for take-off later this year.
Despite this cautionary note, Wall Street remains slightly more upbeat, with 4 Buy and 2 Hold ratings giving the stock a Moderate Buy consensus rating. The 12-month average price target of $11.83 implies a ~16% potential upside in the coming months.
Source: https://www.tipranks.com/news/archer-aviation-stock-tumbles-heres-what-this-investor-predicts-next