JPMorgan shifted gears on air mobility stocks Archer Aviation Inc (NYSE:ACHR) and Joby Aviation Inc (NYSE:JOBY), downgrading them despite strong sector enthusiasm.

Analyst Bill Peterson adjusted Archer Aviation stock to a Neutral rating and Joby Aviation stock to Underweight, noting their significant market gains surged past what fundamentals justify.

Market Enthusiasm Outpaces Fundamentals

Peterson highlighted that Archer and Joby have outperformed the Clean Tech sector, gaining 145% and 86%, respectively, over the past six months. This rise correlates with speculative inflows and market movements aligned with Tesla Inc (NASDAQ:TSLA) and Rocket Lab USA Inc (NASDAQ:RKLB). “These companies are trading as if regulatory hurdles have already been cleared,” Peterson stated, warning that elevated valuations could retreat as regulatory challenges persist.

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Certification Challenges Continue

Despite potential regulatory possibly easing under the upcoming Trump administration, ongoing safety testing and certification remain hurdles. Peterson sees Archer’s partnership with defense tech company Anduril as promising but believes its immediate valuation upside is capped.

He assigned a $9 price target, reflecting incremental earnings potential from its defense ventures.

Similarly, while Joby’s leadership in for-credit testing and partnerships, such as with Toyota Motor Corp (NYSE:TM), indicate future growth, Peterson remains cautious.

The raised price target of $6 still implies downside risk due to certification uncertainties and market volatility.

Balancing Growth Potential, Risks

Peterson anticipates potential capital raises to fund commercialization efforts for both companies.

“Investors must tread carefully,” he warned, suggesting that high short interest could lead to rapid price declines despite operational progress.

As Archer and Joby push toward commercialization, the analyst sees significant long-term potential but remains wary of near-term risks tied to market enthusiasm outpacing operational milestones.

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Photo: Courtesy Joby Aviation