Archer Aviation (ACHR -5.81%) received a strong endorsement from a Wall Street analyst, and investors are buying in. Shares of the electric plane start-up gained as much as 14% on Wednesday after it was initiated with an outperform rating at Raymond James.
Archer is one of a handful of companies working to develop electric airplanes capable of vertical takeoffs and landings, or eVTOLs. They are small planes best suited for flying over city traffic jams or connecting city airports to nearby suburbs, leading some to describe them as flying taxis.
It is a promising technology with a huge potential addressable market, but with a lot of competition. Archer is racing to get a product to market against fellow start-ups Joby Aviation, Lilium, and Vertical Aerospace, as well as big-pocketed aerospace companies including Boeing, Textron, and Embraer.
Raymond James analyst Savanthi Syth likes Archer's chances to be among the winners. The analyst initiated coverage on a number of these companies with a generally favorable outlook and said that Archer shares are particularly compelling on a relative valuation basis.
Syth said that although Archer doesn't have some of the intellectual property chops that others have, it has a relatively clear path to market and regulatory approval. The analyst assigned an $8 price target to the stock, more than double where Archer shares are trading even with Wednesday's jump.
Archer has a lot of big-named partners, including automaker Stellantis, providing manufacturing support, and United Airlines Holdings, signed up with a preorder of $1 billion worth of aircraft.
This stock is not without risk. There is still a massive challenge up ahead as Archer attempts to win regulatory approval and begin manufacturing at scale.
But the company does appear to be moving in the right direction. Investors at least on Wednesday are buying into the potential.