The aerospace & defense industry does not always receive heightened investor attention because it does not typically showcase growth prospects as solid as the technology and other high growth industries. However, considering current market volatility on concerns about aggressive interest rate increases to control multi-decade high inflation, defense stocks could provide the stability investors are seeking thanks to long-term contracts these companies have with the government.
Investors’ interest in defense stocks is evident from the Invesco Aerospace & Defense ETF’s (PPA) 6.6% gains over the past six months, versus the SPDR S&P 500 Trust ETF’s (SPY) 9.5% loss over this period.
Furthermore, seven European nations have increased their defense budgets amid the Russia-Ukraine war. In addition, President Biden recently signed a $40 billion package for Ukraine to provide military and humanitarian aid. According to a Mordor Intelligence report, the U.S. aerospace and defense market is expected to grow at a CAGR of around 2.4% through 2030. Against this backdrop, we think it could be wise to add quality aerospace and defense stocks Archer Aviation Inc. (ACHR) and Planet Labs PBC (PL) to one’s watch list because Wall Street analysts expect these stocks to soar by more than 95% in the near term.
Archer Aviation Inc. (ACHR)
Incorporated in 2018, Palo Alto, Calif.-based ACHR is an urban air mobility company that designs, develops, manufactures, and operates electric vertical takeoff and landing aircraft to carry passengers. The company was formerly known as Atlas Crest Investment Corp. and changed its name to Archer Aviation Inc.
On May 12, 2022, Adam Goldstein, ACHR’s Co-Founder and CEO, said, “The Archer team remains singularly focused on our vision of getting to commercialization as expeditiously as possible. In Q1 of 2022, we made great progress across several the critical milestones that are required for us to achieve our business goals in 2022 and beyond. We are one of the most well capitalized and positioned eVTOL companies in the world to take advantage of the unique eVTOL market opportunity.”
ACHR’s cash and cash equivalents increased 2,896.6% year-over-year to $704.20 million for its fiscal first quarter, ended March 31, 2022. The company’s total operating expenses declined 31.2% year-over-year to $65.30 million. Also, its net loss and comprehensive loss came in at $59.20 million, down 37.6% year-over-year.
Analysts expect ACHR’s EPS to increase 84.4% year-over-year for the quarter ending September 30, 2022. The stock has surged 69% in price over the past three months to close Friday’s trading session at $4.80. Wall Street analysts expect the stock to hit $9.50 in the near term, which indicates a potential upside of 97.9%.
Planet Labs PBC (PL)
San Francisco, Calif.-based PL designs, constructs, and launches constellations of satellites to provide high cadence geospatial data delivered to customers through an online platform worldwide. The company offers Open Geospatial Consortium and space-based hardware and related software systems.
On May 25, 2022, PL announced that the National Reconnaissance Office had selected Planet Labs Federal, Inc., its wholly-owned subsidiary, for an Electro-Optical Commercial Layer contract. Robbie Schingler, PL’s co-founder and Chief Strategy Officer, said, "Planet has been proud to partner with the U.S. government for many years, and the EOCL award is the next giant leap in our work together."
PL’s net revenue increased 23% year-over-year to $37.10 million for its fiscal fourth quarter ended Jan. 31, 2022. The company’s gross profit grew 86.6% year-over-year to $13.92 million. Also, its loss per share came in at $0.26, down 68.7% year-over-year.
For its fiscal 2023, analysts expect PL’s EPS and revenue to increase 66.3% and 38.1%, respectively, year-over-year. The stock has gained 21.5% in price over the past month to close Friday’s trading session at $5.83. Wall Street analysts expect the stock to hit $13.75 in the near term, which indicates a potential 135.9% upside.
ACHR shares were trading at $4.51 per share on Monday afternoon, down $0.29 (-6.04%). Year-to-date, ACHR has declined -25.33%, versus a -13.05% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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