Archer Aviation Is Gaining Today -- Is the Stock a Buy?

Archer Aviation (NYSE: ACHR) stock is moving higher in Thursday's trading. The company's share price was up 1.2% as of 2:30 p.m. ET and had been up as much as 10% earlier in the daily session.

Archer Aviation stock is climbing following recent analyst coverage on the stock. Yesterday, Canaccord analyst Austin Moeller published a note on Archer and maintained a buy rating on the stock. But notably, he actually lowered the firm's one-year price target from $14 per share to $13 per share. Still, the new price target suggests potential upside of roughly 37.5% as of this writing.

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Explaining the rationale behind the price target decrease, Moeller pointed to stock dilution stemming from Archer's recent move to sell new shares worth $301.75 million. On the other hand, he continues to think that Archer's push into the defense industry through its partnership with Anduril will be a significant positive performance catalyst.

Is Archer Aviation stock a buy?

Archer Aviation has still yet to record any sales since going public in 2021, which makes the stock a difficult one to value by traditional means. The company's outlook is highly speculative, and success hinges on receiving necessary regulatory approvals, bringing products to market, and scaling its operations to achieve profitability.

For investors who aren't willing to embrace the risk and volatility that come with speculative stocks, Archer probably isn't a great portfolio fit. On the other hand, I think there are signs that the stars are aligning for the business and that it could go on to be a massive winner for risk-tolerant investors.

Archer looks poised to launch commercial operations for its Midnight electric vertical take-off and landing (eVTOL) aircraft this year, with a debut in Abu Dhabi looking like the most likely kickoff for operations. Commercial flights for Midnight aircrafts could follow in Japan and the U.S. not long after. While it will take multiple years for the company to fulfill the sales, Archer says that it already has more than $6 billion in orders for the aircraft.

As noted in the recent coverage on the stock from Canaccord, defense industry initiatives look poised to dramatically expand the company's total addressable market and could turn into a powerful long-term performance driver. So while the company has a market cap of roughly $4.1 billion despite not recording any sales yet, I think there's a good chance its valuation will climb far higher over the next five years.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.