Are Archer Shares Set for Liftoff After Electric Air Taxi Milestones?

• Wondering if Archer Aviation stock is undervalued right now? You are not alone, especially with all the buzz about its future and its wild share price ride.
• Despite a rough patch recently, with shares dropping 10.4% over the past week and nearly 39% over the past month, Archer has soared 85.5% in the past year and an eye-popping 213.4% over the past three years. This hints at both opportunity and volatility.
• Much of the recent excitement (and anxiety) around the stock has been fueled by updates on Archer's electric air taxi milestones and big partnerships, such as deals with United Airlines and recent government support for urban air mobility. Positive regulatory momentum and fresh funding headlines have certainly shaped the latest price swings, turning heads in the process.
• On our 6-point valuation score, Archer Aviation earns a 4 out of 6. The score reflects key checks where the market may be underestimating its true worth, but there is more to the story. Let's dig into the usual valuation methods, and then get to a smarter way of sizing up Archer's value by the end of this article.

Archer Aviation delivered 85.5% returns over the last year. See how this stacks up to the rest of the Aerospace & Defense industry.

Approach 1: Archer Aviation Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company’s worth by forecasting its future free cash flows and discounting them back to today’s dollars. For Archer Aviation, this involves projecting how much cash the company could generate in the years ahead, then adjusting those estimates to reflect present-day value.

Currently, Archer Aviation’s Free Cash Flow (FCF) is negative, at around -$481 million for the latest twelve months. According to analyst forecasts, the company’s cash flows should remain negative for the next couple of years and turn positive by 2028 with an estimated $19 million, then rise to $300.5 million by 2029. Beyond 2029, further growth is projected and is expected to eventually reach nearly $1.65 billion by 2035, with these long-term figures extrapolated beyond analysts’ direct estimates.

The resulting DCF calculation suggests an intrinsic value of $34.26 per share. Comparing this to the current share price reveals a significant disconnect. The DCF model indicates the stock is about 76.8% undervalued.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Archer Aviation is undervalued by 76.8%. Track this in your watchlist or portfolio, or discover 874 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Archer Aviation.

Approach 2: Archer Aviation Price vs Book

The price-to-book (PB) ratio is commonly used to value companies, especially those that are not yet profitable, because it compares a stock’s market price to its balance sheet value. For companies still deep in investment mode like Archer Aviation, book value provides a tangible snapshot of assets versus market optimism.

Typically, a higher PB ratio can be justified for firms with strong growth potential and lower risk. A lower ratio signals caution among investors. For Archer Aviation, the current PB ratio stands at 3.13x. By comparison, the average in the Aerospace & Defense industry is slightly higher at 3.31x, and the average among Archer’s peers comes in at about 3.80x. This places Archer’s valuation a bit below its main benchmarks, suggesting the market is cautiously optimistic about its long-term prospects but not willing to pay a premium just yet.

Simply Wall St's "Fair Ratio" aims to go deeper than a simple peer or industry comparison by considering Archer’s unique mix of growth expectations, risks, profit margins, market capitalization, and where it sits within its industry. This approach produces a proprietary benchmark more tailored to the specific business. This is especially useful for emerging companies, where one-size-fits-all comparisons can be misleading.

Comparing Archer’s actual PB ratio with its Fair Ratio, the difference is less than 0.10. This means the stock appears fairly valued relative to what would be expected given its business profile and current outlook.

Result: ABOUT RIGHT

PB ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1401 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Archer Aviation Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is a simple but powerful approach that lets you connect the story you believe about a company to the numbers behind it, such as the fair value you think is reasonable, and your estimates for future revenue, profit, and margins.

Narratives work by linking your perspective about Archer Aviation’s future, whether that means sky-high adoption of electric air taxis or a slower, more cautious rollout, to a specific financial forecast and a resulting fair value. This turns investing from just crunching numbers into telling your own, data-driven story. With Narratives now available right on Simply Wall St’s Community page, millions of investors can easily build, share, and update their views as news or earnings are released.

This dynamic approach helps you keep your investment decision relevant, as Narratives automatically update when new information becomes available. Investors can quickly compare the fair value from their chosen Narrative to today’s share price to decide whether to buy, hold, or sell. For example, one investor’s optimistic Narrative projects Archer shares could be worth $42 based on aggressive market growth, while another sees a fair value as low as $8 with more conservative assumptions.

Do you think there's more to the story for Archer Aviation? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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