Should You Reconsider Archer Aviation After Key FAA Test Flight Approval and Recent Price Drop?

• Wondering if Archer Aviation is undervalued or poised to soar even higher? You are not alone, as many investors are asking the same question right now.
• The stock has seen some impressive long-term results, up 238.5% over three years and 13.3% in the last year. However, recent volatility stands out with shares down 31.8% over the past month and 20.1% year-to-date.
• Much of this recent price movement comes alongside increased media buzz about Archer’s partnerships, including newly announced collaborations with major airlines and the FAA awarding the company important test flight clearances, fueling both hopes and skepticism about their near-term prospects.
• When it comes to valuation, Archer Aviation scores a 4 out of 6 according to key value checks. This suggests there is still room for opportunity or concern. Let’s walk through those standard valuation methods, and keep an eye out for an even smarter way to think about value coming up later in the article.

Find out why Archer Aviation's 13.3% return over the last year is lagging behind its peers.

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

The Discounted Cash Flow (DCF) model estimates a company’s true value by projecting its future cash flows and then discounting them back to their value today. This helps investors see what a business is really worth when future potential is accounted for.

For Archer Aviation, the analysis starts with a current Free Cash Flow (FCF) of -$481.4 million, reflecting heavy investment during its early growth. Analysts project FCF to remain negative for several years, with estimates of -$550.2 million in 2026 and -$451.2 million in 2027. A turnaround is forecast from 2028, with FCF expected to hit $16.5 million, then rapidly climbing to $232 million by 2029 as operations scale up. Extrapolated projections see FCF topping $1.2 billion by 2035, signaling strong anticipated growth in the years ahead.

After discounting each year’s estimated cash flows, the DCF valuation gives Archer Aviation an intrinsic value of $21.10 per share. With the current share price sitting roughly 63.8% below this calculated value, the stock appears notably undervalued based on this method.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Archer Aviation is undervalued by 63.8%. Track this in your watchlist or portfolio, or discover 928 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 (P/B) ratio is often a suitable metric for valuing early-stage or unprofitable companies like Archer Aviation, where traditional earnings-focused ratios do not apply. The P/B ratio compares a company's market price to its net asset value, providing insight into how much investors are willing to pay for each dollar of the company's assets.

Typically, a "normal" or "fair" P/B ratio is influenced by expectations for a company’s future growth and the risks it faces. Higher growth prospects or strong brands may warrant a higher multiple. Increased risk or slow expected growth may justify a lower one.

Archer Aviation currently trades at a P/B ratio of 3.39x. This compares to an industry average of 3.32x and a peer average of 4.25x. While Archer’s P/B is close to the sector norm and below direct peers, it is important to look beyond simple comparisons to better understand valuation in context.

This is where Simply Wall St's "Fair Ratio" comes in. Rather than just matching Archer Aviation to generic industry or peer multiples, the Fair Ratio considers a matrix of factors such as growth forecasts, company-specific risks, profit margins, industry trends, and market cap to compute a more personalized benchmark for valuation.

For Archer Aviation, the actual P/B ratio of 3.39x sits very close to what the Fair Ratio would suggest. This indicates that, based on asset values and the company’s current profile, the stock looks fairly valued at today’s levels.

Result: ABOUT RIGHT

PB ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1441 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Archer Aviation Narrative

Earlier we mentioned that there's an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is simply the story you tell about a company, based on your personal expectations for its future, linking your view of what will drive revenue, earnings, and margins directly to the numbers that matter. Narratives connect the company’s story to a financial forecast and then calculate a personalized fair value, giving you a clear investment thesis you can actually follow.

On Simply Wall St’s Community page, millions of investors use Narratives as a straightforward, dynamic tool. Whenever major news or earnings updates occur, Narratives are automatically refreshed so your perspective always reflects the latest information. Comparing your Fair Value to the current share price can help you decide when to buy or sell with more confidence.

For example, some investors’ Narratives value Archer Aviation at more than $25 per share based on high growth expectations, while others estimate as low as $8 reflecting greater caution. Narratives make it easy to see these perspectives and build your own, so you can invest with clarity and conviction.

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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