Archer Aviation (ACHR 0.66%) is one of a small number of publicly tradable U.S. companies that develop electric vertical takeoff and landing (eVTOL) vehicles. These are more commonly known as flying cars or air taxis. It requires a great deal of vision and, like it or not, capital to get this type of business off the ground.
It would be disingenuous to claim that Archer Aviation's financial position is perfect. Yet, improvement should be the name of the game if you're an eVTOL company watcher and/or investor. Otherwise, if you're too strict with your financial criteria, you'll never get to invest in Archer Aviation or any other air-taxi provider.
Unfortunately for Archer Aviation's stakeholders, the stock went into free fall in January. This could be more of an opportunity than a problem, though, if Archer Aviation successfully advances and commercializes both its air taxis and the infrastructure needed to make this type of technology viable.
Operational progress and financial challenges
If you're willing to view Archer Aviation stock as highly speculative and only appropriate for a small portfolio position, then at least you can sit back as an investor and enjoy the ride. A quick glance at Archer Aviation's financials indicates that there will likely be some turbulence along the way.
For example, Archer Aviation's position of cash, cash equivalents, and short-term investments totaled nearly $450 million in 2023's first quarter, only to dip to $407.6 million in the second quarter and then recover to $461.4 million in the third quarter. Granted, the company's cash position increased, at least in part, because Archer Aviation issued shares. Hence, investors should consider whether the company might engage in share-value-dilutive activity in the future.
Sticking to that same time frame, Archer Aviation's net loss went from $113.1 million in Q1 2023 to $184.1 million in Q2 but then subsided to $51.6 million in Q3. Of course, the company didn't discuss sales/revenue in any of these quarterly reports since eVTOL aircraft still have to clear regulatory hurdles before Archer Aviation can properly commercialize them. Moreover, the company's narrowing net loss needs to be taken in context as, by Archer Aviation's own admission, it was "primarily due to a reversal of previously recognized stock-compensation expense of $59.1 million." Moreover, the company's third-quarter cash burn was higher than it was in 2023's second quarter. The bottom line here is that the company has some financial red flags and, if you're a stickler for fiscal discipline, you may want to steer clear of Archer Aviation stock.
Meanwhile, on the operational front, Archer Aviation seems to be making some progress. Not long ago, the company's main aircraft, called Midnight, completed Phase 1 of its flight-test program. Phase 1, according to the company, involved "an array of progressively more complex flight maneuvers and data gathering missions." Next up is Phase 2, which involves speed testing for Midnight. Unfortunately, the press release doesn't specify a timeline for how long this phase might take.
Archer Aviation delves directly into eVTOL infrastructure
In a recent interview, Archer Aviation CEO Adam Goldstein spoke effusively about the developing market for air taxis, but also for the category of eVTOL-related infrastructure. It's expected that Goldstein will talk up the flying-car infrastructure niche, but Archer Aviation isn't all talk and no action.
In particular, Archer Aviation is directly tackling the infrastructure issue through a partnership with Atlantic Aviation and BETA Technologies. Together, these companies plan to install "interoperable rapid recharging systems" as well as establish "sites for electric aircraft operations" in several major U.S. metropolitan regions.
On the other hand, this might not represent a competitive advantage as Archer Aviation's competitor, Joby Aviation (NYSE: JOBY), also has an eVTOL-infrastructure partnership with Atlantic Aviation. So, it's not as if Archer Aviation is flying solo in this burgeoning niche industry.
Still, it appears that Archer Aviation is showing some progress on the operational front despite not having full regulatory approval to commercialize its Midnight aircraft. Meanwhile, Archer Aviation is down from its 2023 peak price, offering a buy-the-dip opportunity for investors. Just understand that the future is uncertain for the eVTOL and related infrastructure market, especially in terms of timelines for regulatory clearance and revenue generation. Hence, Archer Aviation is worth buying now if you understand the speculative nature of this type of investment and maintain a tiny position size.
