To Hold or Fold Archer Aviation Stock as eVTOL Adoption Grows?

The global eVTOL (electric vertical takeoff and landing) market experienced notable developments in 2024, marked by significant growth and technological advancements, with North America constituting a significant share of this market. Archer Aviation Inc. ACHR, a U.S.-based company currently working through certification with the Federal Aviation Administration (FAA) and other global aviation authorities to commercialize its Midnight eVTOL aircraft, thus stands to benefit from the aforementioned growth trend. 

As intensifying urban congestion and the growing need for modern transport alternatives continue to drive the growth momentum of the eVTOL industry, growth investors interested in aerospace stocks might want to buy more stakes of ACHR. 

However, one should be mindful of evaluating the company’s inherent historical performance, growth prospects, valuation and limitations (if any) before making an investment based solely on industry trends. Let’s find that out for Archer Aviation.

ACHR Stock Outperforms Its Industry, Sector & S&P500

Archer Aviation’s shares have surged a solid 181% in the past year, outperforming the Zacks Aerospace-Defense industry’s growth of 20.1% as well as the broader Zacks Aerospace sector’s gain of 19.3%. It has also surpassed the S&P 500’s return of 11.3% in the same time frame.

A similar stellar performance can be seen in the one-year performance of other industry players, such as Joby Aviation JOBY and Embraer ERJ, which are also involved in the eVTOL market. Notably, shares of ERJ have surged a solid 70.1%, while those of JOBY rose 52.9% in the past year.

Tailwinds Driving ACHR Stock

Archer Aviation’s aforementioned surge has been fueled by key developments surrounding its Midnight aircraft and expanding presence in both commercial and defense sectors. The company received FAA Part 135 certification last year, enabling it to begin limited commercial operations ahead of the aircraft’s full launch. It ended 2024 by securing occupancy approval for its high-volume manufacturing facility in Georgia, aiming to begin production in early 2025 and scale to 650 units annually by 2030.

ACHR started 2025 by raising $301.8 million in equity capital to accelerate the development of its hybrid aircraft platform, particularly for defense applications. In April, it secured design approval to convert a helipad at the Abu Dhabi Cruise Terminal into the city’s first hybrid heliport, paving the way for early Midnight air taxi services with Abu Dhabi Aviation.

Most recently, Archer launched the next phase of flight testing for Midnight, featuring piloted flights that demonstrated both vertical and conventional take-off and landing capabilities. These advancements not only enhance operational flexibility but also reinforce the aircraft’s readiness for commercial deployment. Collectively, these milestones positioned ACH favorably in the evolving eVTOL space.

What Lies Ahead for Archer Aviation?

As increasing demand for urban air mobility, along with growing technological advancements in sustainable transportation solutions, continues to bolster the growth prospects for the global eVTOL market, industry players like ACHR, JOBY and ERJ should gain substantially in the coming years. To this end, a market research firm, Fortune Business Insights, expects the global eVTOL aircraft market to witness a CAGR of 23.1% in the 2021-2028 period.
Such market growth trends bolster Archer Aviation’s prospects, especially once its Midnight jets become commercially available in the open market. 

Let’s take a sneak peek at ACHR’s near-term earnings estimates to check if that also reflects the same.

Earnings Estimates for ACHR

The Zacks Consensus Estimate for second-quarter and full-year 2025 earnings indicates a year-over-year improvement. The consensus estimate for 2026, however, mirrors a declining trend. 

The consensus mark for its near-term earnings implies an upward revision over the past 60 days, indicating enhanced investor confidence in the stock’s earnings growth capabilities.

Average Target Price for ACHR Suggests an Upside

Based on short-term price targets offered by nine analysts, Archer Aviation is currently trading 17.2% below its average Zacks price target.

Risks to Consider Before Choosing ACHR Stock

Although Archer Aviation shows potential in the near term, its long-term viability is uncertain as the eVTOL market remains nascent. ACHR’s success depends on its ability to design, certify, and scale production, while also relying on evolving market demand. Public acceptance of eVTOLs may be delayed by concerns over safety, noise, and affordability, potentially slowing mass adoption. 

Further, ACHR is yet to generate revenues, raising concerns about its ability to deliver shareholder value. Until it commercializes its Midnight aircraft and builds a strong customer base, long-term returns may remain limited. Its negative Return on Invested Capital (ROIC), which trails the industry average (as one can see below), further justifies that.

ACHR’s industry peer, JOBY, also holds a negative ROIC. However, another of ACHR’s industry peers, ERJ, boasts a positive ROIC of 14.24, which is also higher than the industry’s level.     

What Should an Investor Do?

While Archer Aviation has made notable strides in flight testing, partnerships, and market positioning, its lack of revenues and negative ROIC raise red flags for long-term investors. Therefore, investors may be better off adopting a wait-and-watch approach rather than investing in ACHR stock right now.

However, those who already own this Zacks Rank #3 (Hold) stock may continue to do so, considering the stellar performance in the past year, upward revision in earnings estimates and the upside in its price target. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
 

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This article originally published on Zacks Investment Research (zacks.com).

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