Motley Fool analyst thinks recent Archer and Boeing deal adds value to both stocks
The analyst says the deal derisks both companies' business models, gives Archer access to technology it cannot develop itself, and gives Boeing an opportunity to profit from the eVTOL industry / Photo: Facebook / FlyArcher
A recent deal between mid-cap air taxi developer Archer Aviation and Boeing, where the former will acquire three businesses from the latter in exchange for a near-20% stake in Archer, will strengthen the investment case for both stocks, writes Motley Fool analyst Lee Samaha. He believes it will diversifies Archer’s business and reduces risk, while giving Boeing exposure to the emerging air mobility market.
Rationale for the deal
The deal, announced on August 10, diversifies Archer’s business by adding three of the aerospace giant’s subsidiaries: Wisk, SkyGrid, and Insitu, Samaha notes. Wisk specializes in autonomous flight tech and the development of electric vertical takeoff and landing (eVTOL) aircraft, SkyGrid develops air traffic management systems, and Insitu designs and manufactures uncrewed aircraft systems.
The transaction also removes Wisk as a potential Archer competitor and gives the mid-cap company the option to develop a comprehensive transportation-as-a-service business with the help of SkyGrid. “Finally, Insitu's revenue could provide much-needed cash flow to Archer as it continues to develop its eVTOL business,” Samaha writes.
For now, the company generates revenue from noncore operations. In the second quarter of this year, revenue more than tripled quarter over quarter to $5 million, driven by expanded operations at Hawthorne Airport near Los Angeles. In December, the company acquired the airport’s master lease and associated subleases. Archer plans to use the site as an air hub for its air taxis, secure type certification for them, and begin flights by the 2028 Olympic Games in Los Angeles.
The deal is also good for Boeing because it will allow the company to focus on its core businesses, the Motley Fool analyst wrote. At the same time, the aerospace giant will be able to profit from the growth of eVTOLs. Under the agreement, Boeing will receive a 19.75% stake in Archer in exchange for its assets, plus warrants. Samaha calculates that the stake is currently worth around $930 million. He adds that according to the press release, Boeing will retain “access to the Wisk core autonomous flight technology for its current and next-generation commercial and defense aircraft.”
The deal is expected to close by the end of the year.
What other analysts say
Archer has fallen 16.2% year to date. Wall Street is upbeat on the stock. It has six “buy” calls versus three “hold” ratings, according to MarketWatch data. The average target price is $10.60 per share, implying 68% upside from the Friday close.
