What happened
Shares of Archer Aviation (ACHR -2.07%), a start-up manufacturer of electric vertical takeoff and landing aircraft (eVTOL), took off more like a rocket on Thursday, rising 13.2% through 11 a.m. ET.
Investment bank JPMorgan had something to do with that.
Image source: Getty Images.
So what
In a note out this morning, JPMorgan announced it is initiating coverage of Archer Aviation with an overweight rating and a $7 price target.
JPMorgan praised Archer's two-pronged approach to the air taxi market as "pragmatic," as it plans to both sell eVTOL airplanes directly to commercial customers and also build its own network of air taxis. At the same time, the analyst noted that Archer seems to have a better balance sheet than some of its air taxi peers -- which include companies such as Joby Aviation and Vertical Aerospace.
Now what
Interestingly, when fellow investment banker Deutsche Bank reviewed these same three companies in a note two weeks ago, it, too, concluded that Archer Aviation is best positioned to dominate this emerging industry, awarding Archer a "buy" rating (and a $10 price target), but rating Joby and Vertical only "hold." It would therefore appear that a consensus is forming on Wall Street that (a) air taxis are going to be a real thing soon, and (b) Archer is the company to own if this does become a thing.
The analysts might be right about either or both of those hypotheses -- but even so, I'd suggest caution. Of the three companies, Vertical Aerospace is the only one yet reporting positive revenues, but even Vertical's revenues haven't hit the $1 million mark. All three companies are still burning cash at a frenetic pace; Archer alone burned more than $110 million last year. And while Archer does have a big cash hoard to cushion its losses (about $724 million, net of debt) as it builds its business, success is far from assured.
Until Archer shows clear signs of being on a path to profitability, caveat investor.
