Investing in quality penny stocks can be a great strategy for those with a higher risk appetite. Over the last few decades, several penny stocks have created massive wealth for long-term shareholders. In fact, multi-trillion-dollar giants like Apple (AAPL) and Amazon (AMZN) were once penny stocks, and are now among the most prominent companies globally.
According to Wall Street's consensus price target estimates, Archer Aviation (ACHR) is one “strong buy”-rated penny stock that has the potential to more than double in value.
Archer Aviation Has Underperformed Since Its IPO
Archer Aviation (ACHR), valued at $1.17 billion by market cap, designs, develops, and operates electric vertical takeoff and landing aircraft for the urban air mobility market. It is among the few players working on commercializing electric vertical takeoff and landing (eVTOL), providing it with an early mover advantage.
Founded in 2018, shares of the penny stock went public in late 2020 and currently trade about 80% below all-time highs, trailing the broader markets by a wide margin.
Archer Aviation is still pre-revenue, and the company lost $107 million in Q2 of 2024, as it aims to expand manufacturing capabilities while securing all the required regulatory approvals. The company plans to launch its first aircraft next year, and recently announced a slew of partnerships that should boost investor confidence.
Archer Aviation Secures Big-Ticket Contracts
Last week, Archer Aviation delivered its first Midnight aircraft to the U.S. Air Force, and inked a contract valued at up to $142 million. Archer Aviation believes the Midnight aircraft will provide a safer, more cost-effective, and quieter alternative to legacy internal combustion engine (ICE) options. Armed with vertical take-off and landing capabilities, the aircraft is ideally suited for military aviation operations.
Archer and Future Flight Global also signed a memorandum of understanding (MoU) to purchase up to 116 Midnight Aircraft worth up to $580 million, increasing the company’s order book to almost $6 billion.
Automobile giant Stellantis (STLA) is one of the biggest investors in Archer Aviation. Last week, Stellantis announced it would invest up to $400 million in the urban aircraft manufacturer to help scale Archer’s Midnight manufacturing to 650 aircraft annually. The investment will also cover manufacturing labor costs and certain capital expenditures at Archer’s Georgia manufacturing facility through 2030. To date, Stellantis has invested roughly $300 million in Archer Aviation.
Some of Archer’s big-ticket investors include aviation companies such as United Airlines (UAL) and Southwest Airlines (LUV). Since the end of Q2 of 2024, Archer Aviation has secured $230 million in additional equity, shoring up its liquidity position.
What is the Price Target for Archer Aviation?
Archer Aviation is well positioned to transform urban travel, replacing 60–90-minute commutes by car in traffic with an estimated 10-20 electric air taxi flights.
Out of the seven analysts covering ACHR stock, five recommend “strong buy,” one recommends “moderate buy,” and one recommends “hold.” Interestingly, no analysts are bearish on the small-cap aviation stock.
Wall Street's average target price for ACHR stock is $8.79, indicating an upside potential of 142% from current trading prices.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
