Archer Aviation (NYSE:ACHR) unveiled a deal earlier last month that marks an important first for the company and may open the door to a new revenue stream. The eVTOL manufacturer said it will supply partner Anduril and EDGE Group with its electric powertrain for the Omen VTOL drone program. It’s the first time Archer has made its proprietary dual-use battery-electric powertrain technology available to an outside partner.
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Canaccord analyst Austin Moeller sees the move as a “material shift in the company’s operating model that introduces a new revenue stream for the business.”
According to Moeller, the announcement highlights the deepening relationship between Archer and the fast-growing defense-tech firm, underscoring the value of the core powertrain technology originally developed for the Midnight aircraft. Archer’s system will also be adapted into a hybrid configuration to support the military VTOL drone program the company is advancing with Anduril. While developing Midnight, Archer chose to bring battery-pack production in-house, despite relying on outside aerospace suppliers for most other components. Moeller believes that “This decision enabled development of powertrain technology that is highly optimized for an array of aviation applications across both commercial aerospace and defense.”
CEO Adam Goldstein says the agreement with Anduril is likely the first of several examples where Archer could provide its powertrain to outside companies. While the announcement is separate from Archer’s hybrid-electric drone project with Anduril, the new partnership grew out of the time Archer’s engineers have spent working with Anduril’s team over the past year. That collaboration helped both sides get comfortable with each other’s technology and spot additional chances to work together beyond the hybrid-electric aircraft effort.
Archer is now participating in both the Omen project as the eVTOL powertrain supplier and the hybrid-electric VTOL project with Anduril, while also partnering with Palantir to develop AI-driven air traffic management systems for next-gen aviation. Over the past three months, the company has acquired Hawthorne Airport – its new eVTOL travel hub near LA – along with Lilium’s IP portfolio, Mission Critical Composites, and Overair’s intellectual property and talent. At the same time, Archer is ramping up Midnight aircraft production in California and Georgia, aiming for an annual output of 50 Midnights within the next 12 months.
“That all being said,” Moeller added, “investors are closely focused on the certification and flight-testing progress for the Midnight passenger eVTOL. Management has not provided a recent update on when the piloted full transition flight of the Midnight will occur, but this is a critical milestone to proceed into TIA/for-credit testing with FAA pilots.”
Meanwhile, Moeller keeps his Buy rating on ACHR intact, while his $13 price target implies ~67% upside from current levels. (To watch Moeller’s track record, click here)
3 other analysts are also positive on ACHR’s prospects, while 1 Hold can’t detract from a Strong Buy consensus rating. The average target lands at $12.40, a figure that points toward 12-month gains of 59%. (See ACHR stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.