Air mobility specialist Archer Aviation (NYSE:ACHR) — which focuses on the development of electric vertical takeoff and landing (eVTOL) aircraft — saw its shares decline on Thursday despite seemingly positive news. Management revealed that it completed a series of battery pack drop tests, which may help lift investor confidence in the long run. While promising, ACHR stock has faced credibility challenges.
According to the company’s press release, Archer announced the successful completion of rigorous battery pack drop testing, which was conducted at a National Institute for Aviation Research lab. Overall, the event markets a significant milestone for ACHR stock as the underlying test represents one of the most difficult obstacles to overcome for an eVTOL aircraft.
Over the course of a week, Archer’s engineering and certification teams led the testing process of the company’s proprietary battery packs. This involved dropping the battery at a height of 50 feet, which simulates extreme impact scenarios. Further, the testing involved various states of charge: 0%, 30% and 100%.
Per the corporate statement, “the battery packs withstood the impact without any signs of failure and, remarkably, continued to function properly.”
ACHR Stock Caught in a Credibility Crosswind
The importance of the drop tests center on certification by the Federal Aviation Administration (FAA). In order to achieve such status, an eVTOL must meet a series of high standards, with battery testing being a core component.
“Successfully passing the battery pack drop tests marks a pivotal moment that paves the way for future ‘for credit’ certification testing with the FAA,” said Alex Clarabut, Archer’s battery lead. Additionally, Clarabut expressed delight that not only did the battery packs pass the test but they still functioned properly afterward.
Still, ACHR stock faces some skepticism. Last month, Archer stated that it entered the final phase of type certification for its Midnight eVTOL. That caused many industry observers to raise their eyebrows since the company had not yet transitioned to wing-borne flight. Also worth noting, a pilot never flew the Midnight aircraft.
Later, management clarified that it considers the final phase of certification to be what the FAA labels an “implementation phase” prior to the issuance of a type certificate. Still, the issue presents confusion for investors of ACHR stock.
Notably, CNBC personality Jim Cramer recently stated that he can’t recommend Archer “because it just has no earnings power… There’s so many good stocks right now, we don’t need that.”
Why It Matters
Despite the questions surrounding ACHR stock, it enjoys a unanimous strong buy view among covering analysts. The average price target stands at $10.33, implying a 120% upside from the time-of-writing price. The high-side estimate calls for $12 per share.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
