Archer Aviation Shows Promise Amid Overvaluation Concerns: Hold Recommendation Issued

Technical Analysis

Archer Aviation Inc. (ACHR) closed at $7.18 on December 12, 2024, reflecting a minor decline of 2.97%, reaching a price low of $6.85 and a high of $7.45 throughout the day. The stock is trading above its 50-day ($4.60) and 200-day ($4.08) moving averages, indicating a strong upward trend over the recent months. The Relative Strength Index (RSI14) of 57 suggests that the stock is neither overbought nor oversold. However, the MACD of 1.65 shows bullish momentum. The range-bound trade between the support at $6.75 and resistance at $7.29 could imply a potential breakout or a pullback. The Average True Range (ATR) of 11.50—though unusual due to its possibly incorrect value—could suggest high volatility if accurate.

Fundamental Analysis

Archer Aviation has a market capitalization of $3.05 billion and recently raised $430 million via an equity offering. The company's EPS (TTM) of -1.31 signals continued profitability challenges, with a negative PE ratio of -5.47. This suggests the company is not currently profitable. However, the strategic partnership with Anduril Industries to develop a hybrid VTOL military aircraft, coupled with recent capital infusion, positions Archer Aviation well for future growth. Archer’s intrinsic value, as indicated by its discounted cash flow (DCF) of 1.63, suggests that the stock is trading above its fundamental valuation.

Predictions for Next Trading Day and Upcoming Week

Given the stock's recent momentum and strategic developments, there could be short-term volatility attributed to profit-taking and market reactions to the recent equity raise. The stock may trade within the resistance ($7.29) and support ($6.75) levels. Looking into next week, if the market reacts positively to the partnership and capital raise news, the stock could test its year-high near $9.84, provided broader market conditions remain favorable.

Intrinsic Value and Long-term Investment Potential

Although Archer Aviation’s short-term prospects appear optimistic due to recent strategic partnerships and capital infusion, the stock's intrinsic value signals it is overvalued at its current price. Long-term potential is promising, given its revolutionary VTOL projects and partnerships across critical markets like the U.S., UAE, and Japan.

Overall Evaluation: Hold

Considering the technical indicators, recent strategic developments, and fundamental challenges, the analysis categorizes Archer Aviation as a 'Hold'. Despite its ambitious future projects and market momentum, caution is warranted due to its current overvaluation relative to intrinsic value and ongoing profitability issues. Investors may look to existing positions while cautiously monitoring incoming news and financial updates leading up to its earnings announcement scheduled for February 24, 2025.