Shares of Archer Aviation Inc. ACHR have soared 123.2% in the past three months against the Zacks Aerospace-Defense industry’s decline of 9.7% as well as the broader Zacks Aerospace sector’s fall of 6.4%. It also outpaced the S&P 500’s return of 7.8% in the same time frame. 

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The stock’s three-month price return also outperformed that of three key aerospace manufacturers, namely, Airbus Group EADSY, The Boeing Company BA and Embraer S.A. ERJ. Shares of Airbus, Boeing and Embraer have gained 13.4%, 6% and 3.2%, respectively, over the past three months.

This outperformance of Archer Aviation on the bourses might lure investors interested in electric vertical take-off and landing (eVTOL) manufacturers to add the stock to their portfolio. However, before making any hasty decision, it would be prudent to take a look at how ACHR stock has performed so far, the company’s long-term prospects as well as risks (if any) to investing in the same. This would help investors make a more insightful decision.

What’s Pushing ACHR Stock Higher?

Over the past three months, Archer Aviation has achieved a few key milestones, accelerating its progress toward successfully bringing its Midnight eVTOL aircraft into the commercial market. In November 2024, the company announced its signed agreements with Soracle Corporation, a joint venture newly established by Japan Airlines and Sumitomo Corporation. Per this agreement, Soracle will launch its advanced air mobility (AAM) operation in Japan using ACHR’s Midnight aircraft.

In September, Soracle signed an agreement to purchase up to $500 million worth of Midnight aircraft. 

Meanwhile, the company established a consortium in the United Arab Emirates (UAE) during the July-September quarter of 2024, which paved the way for launching its commercial air taxi services in the nation during the fourth quarter of 2025.  

No doubt, these accomplishments reflect the steady progress Archer Aviation is making in the eVTOL market, which must have boosted investors’ confidence in this stock, duly reflected in its past three-month price performance at the bourses.

What Lies Ahead for ACHR Stock?

With increasing traffic congestion in urban cities, the demand for sustainable and low-carbon emission transport solutions is rising, which in turn has been boosting the market growth opportunity for eVTOL aircraft like Midnight.  To this end, it is imperative to mention that following the Federal Aviation Administration’s (FAA) finalized Midnight jet’s airworthiness criteria in May 2024, Archer Aviation is now nearing completion of Phase 3 of the FAA’s 4-phase type certification process while continuing to rapidly advance through Phase 4, the final phase to secure type certification.

Once Archer Aviation starts delivering its eVTOL aircraft to its commercial customers, we may expect the company to generate notable revenues, which in turn would allow it to earn solid gross profit and, thereby, register bottom-line growth. 

A sneak peek at ACHR’s near-term earnings estimates reflects the same.

Upbeat Earnings Estimates for ACHR

The Zacks Consensus Estimate for fourth-quarter and full-year 2024 earnings indicates year-over-year improvement. The estimate for 2025 also mirrors a similar trend. 

The estimates for first-quarter and full-year 2025 reflect upward revision, which indicates enhanced investor confidence in this stock’s earnings generation next year.   

Image Source: Zacks Investment Research

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Risks to Consider Before Choosing ACHR Stock

ACHR offers promising near-term prospects, but whether its business will be sustainable in the long run remains uncertain. This is because the eVTOL aircraft market is still in its early stages, and ACHR's success depends not only on its ability to design, develop and certify eVTOL aircraft but also on how demand for these vehicles evolves. Public acceptance of eVTOLs as an alternative to traditional transport methods could face hurdles related to safety, noise and affordability concerns. Without widespread recognition, ACHR's growth potential may be constrained.

Additionally, ACHR and other aerospace manufacturers are navigating industry challenges, including supply-chain disruptions, rising jet fuel prices, and a shortage of skilled labor. Such factors could hinder ACHR’s ability to complete its projects on time. A significant delay in obtaining FAA certification might necessitate raising additional capital beyond its current reserves, further impacting the timeline for revenue generation. Considering these uncertainties, ACHR faces market and operational risks that could affect its ability to establish a sustainable presence in the evolving eVTOL industry.

The company is yet to generate revenues, which also might be a cause of concern for its investors as it might not be able to offer attractive returns to its shareholders unless it can make a profit from its own business. Its negative Return on Invested Capital (ROIC), which also lags the industry’s ROIC, further justifies that.

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What Should an Investor Do?

Investors interested in Archer Aviation should refrain from buying this stock now, considering its negative ROIC and the uncertain long-term viability of its business. However, those who own it may continue to do so, taking into account the upward revision in its earnings estimates, solid share performance in recent times, and strong progress toward the commercial launch of its Midnight eVTOL. 

The company’s Zacks Rank #3 (Hold) also supports our investment thesis. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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