ACHR - Archer Aviation is seen flying higher after Defense Department contract

2023-08-02 06:43:24 ET

Deutsche Bank sees upside on Archer Aviation ( NYSE: ACHR ) with the large government contract closing the gap further with peers.

Analyst Edison Yu stated that one of the main critiques of Archer ( ACHR ) has been that it does not have proper defense and military support in comparison to Joby Aviation's ( JOBY ) $131M contract with the Defense Department, which targets first flight tests next year. He said that view could be changed after the U.S. Air Force awarded contracts worth up to $142M to the eVTOL aircraft company for the delivery of 6 Midnights. Crucially, Yu reminded that new aircraft do not need Type Certification from the FAA to be used by the DoD.

"The military aspires to use eVTOL mainly for personnel transport, rescue operations and supply chain logistics, and we suspect the size of this award could increase as other branches beyond the Air Force utilize this program for incremental projects. Archer started working with the Air Force in 2021 and assembled a Government Services Advisory Board earlier this year featuring several decorated retired generals."

Initial proceeds are expected to start coming in for Archer ( ACHR ) this year to be used as contra R&D, and the first flight testing is likely in 2024. For investors, the massive valuation gap between ACHR and peers could compress as the contract attracts more attention.

Deutsche Bank assigned a price target of $12 to ACHR to represent more than 45% upside potential for the eVTOL stock.

More on Archer Aviation:

• Archer Aviation: The Best Risk/Reward In The eVTOL Industry
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• Growth metrics on Archer Aviation
• Seeking Alpha's Quant Rating for Archer Aviation

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