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Why Archer Aviation Stock Is Skyrocketing Today
Archer Aviation (NYSE: ACHR) stock is posting big gains in Friday's trading. The company's share price was up 18% as of 1:50 p.m. ET.
The stock is surging following a report that the Commerce Department on Thursday said it is considering implementing a ban on Chinese drones. The news highlights the possibility that Archer's competition could be limited and also spotlights the company's recent push into the defense industry.
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Archer's commercial business could benefit from new regulations
Archer Aviation is an early player in the electric flying taxi space. While the company's Midnight flying vehicles have been operated by pilots in test flights and will almost certainly start out being flown by humans when commercial operations begin, it's likely that autonomous operations will be rolled out at some point. If the government were to implement executive orders that prevent Chinese-made drones and other flying craft from operating in the U.S., that would remove a significant source of potential competition for Archer.
Archer's defense industry push could also get a big boost
In a move that's generated a huge amount of excitement among investors, Archer also recently announced that it is making vehicles for the U.S. defense industry. The company has entered a partnership with innovation-focused defense technology company Anduril to create hybrid vertical takeoff and landing (VTOL) flying vehicles geared toward winning U.S. defense contracts. Anduril has already won contracts with the U.S. Department of Defense for autonomous crafts, and there's a good chance that its technologies will be paired with Archer's aerial technologies for self-navigating flying craft.
Reports that the U.S. could take steps to ban Chinese drones from sale and operation in the country highlight tensions between the two countries. The news also suggests that Archer could be particularly well positioned to take advantage of emerging demand for new types of flying and autonomous crafts in the defense industry. As a pioneering player in a rapidly developing space, the company could be positioned to score major defense contracts that help support big stock gains.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
