Archer Aviation (ACHR +9.76%) is developing electric vertical and takeoff landing aircraft (eVTOL), which could potentially transform urban transportation as we know it. These vehicles, also known as flying taxis, are possible because of modern battery technology and have attracted investments from companies like Boeing, United Airlines, and Stellantis.
While this technology is exciting, there are some hurdles Archer Aviation must overcome to reach commercial operations. If you're considering investing in Archer Aviation today, here's what you can expect over the next year.
NYSE: ACHR
Key Data Points
Archer is developing flying vehicles that could transform urban transportation
eVTOLs are flying vehicles that take off, land, and hover vertically like a helicopter. These vehicles, straight out of science fiction, are possible because of the evolution of battery technology that powers electric cars today. eVTOLs use electric motors for an emissions-free, more efficient means of transportation that is significantly quieter than helicopters.
Archer Aviation has invested heavily in its flagship eVTOL model, Midnight, and has made significant strides toward putting its aircraft into commercial production. Last year, its aircraft received its Special Airworthiness Certificate from the Federal Aviation Administration (FAA), clearing the path to begin test flight operations.
The aircraft recently hit another critical milestone, completing the first phase of its flight test program. In addition, the company recently upgraded its first high-voltage battery packs, a massive step toward getting the aircraft production-ready.
Where will Archer be in a year?
Last year, Archer closed on financing and development agreements with Synovus and Evans General Contractors for $65 million to cover most of the costs of constructing its manufacturing facility in Covington, Georgia.
The first phase of its construction will build a 350,000-square-foot facility that can produce 600 aircraft per year. Archer said the first phase of construction should wrap up in 2024 before its Midnight aircraft goes into service.
Archer continues to work through its testing phases as it gains further approval from the FAA. Its Midnight aircraft recently passed the first phase of testing, completing progressively more complex flight maneuvers. It's now moving into the second phase, where it will fly at faster speeds until it achieves full wing-borne transition. This phase is crucial to demonstrate that the Midnight aircraft can take off, land vertically, and cruise efficiently. Finally, the third phase will test Midnight's aircraft on simulated commercial routes.
Archer won't be able to use its facility to its full potential until it obtains FAA-type certification for Midnight. This certification is a thumbs-up that the design of the aircraft and its components meet stringent safety standards before being flown commercially. The company expects to achieve this certification in late 2024. Production certification will follow, allowing Archer to manufacture at scale.
Image source: Archer Aviation.
Archer has the funding to keep pushing forward
Archer Aviation is one of several companies developing eVTOL. However, the consensus is that Archer and Joby Aviation are the two that are the farthest along in their development.
Companies in the space must have financing because commercial operations are still far off. Archer has garnered significant investments and pre-orders that help fund its operations. In 2021, United Airlines ordered $1 billion in aircraft, with a $10 million prepayment. Stellantis and Boeing have also made equity investments to help it develop Midnight, and so far, Archer has secured $1.1 billion in funding.
Is Archer right for your portfolio?
In a year, Archer hopes to have its FAA-type certification and begin production in its facility to manufacture its aircraft at scale. However, it will still be a cash-burning operation. That's to be expected from a company like this, and that makes it a riskier investment because of uncertainty.
Six analysts covering the stock see the company losing $422 million in 2024. Commercial operations could begin in 2025, which could help it generate revenue. Still, losses will continue to pile up (analysts see it losing another $414 million in 2025) as it scales up its commercial operations.
Archer is an innovative company that could transform urban transportation as we know it, and its market opportunity is huge. Morgan Stanley says the urban air mobility market could reach $1 trillion by 2040. However, it has many hurdles to clear before it can operate commercially, and then it has an even longer runway before it can scale and become a profit-generating company.
Investors who are OK with holding a speculative investment in the start-up could allocate a small amount to the intriguing company with explosive long-term upside potential. However, Archer still has its work cut out for it over the next several years, so conservative or risk-averse investors may want to stay on the sidelines on this stock for now.
