Archer Aviation (ACHR -0.09%) has developed impressive electric vertical takeoff and landing (eVTOL) aircraft and recently raised new funding that gives it plenty of room to grow. Investor sentiment has been flying high for Archer, with the company's share price surging 65% over the last 12 months.
But Archer says it won't have any sales of its aircraft until later this year and isn't generating a single dollar of revenue right now.
Still, there's no denying the company resonates with investors who are willing to take a risk on innovative ideas. Let's take a look at whether Archer Aviation stock is worth buying while it's still below $10 per share.
Image source: Archer Aviation.
A solid flight plan
Archer has already conducted more than 400 test flights of its Midnight aircraft, proving the company is far more than just a cool idea. Management said recently that production of the company's Midnight aircraft has already begun, with the goal of making 10 of them this year.
Archer also debuted its "launch edition" commercialized air taxi program in the fourth quarter (which ended Dec. 31), with Abu Dhabi Aviation as its first customer. Management said this will give the company a playbook for launching its service to dozens of customers in the future.
As the company develops its commercial air taxi prospects, it's developing defense aircraft as well. Archer entered into an exclusive agreement with AI drone company Anduril in December to jointly develop a defense eVTOL for the U.S. Department of Defense. This is in addition to a prototype Archer already delivered to the United States Air Force last year.
Finally, the company received Federal Aviation Administration certification for a pilot training program just a few weeks ago. This marks a significant step forward for the company, which can now train and qualify pilots for its planned commercial air taxi services.
No revenue, but decent funding
It's important to point out that Archer hasn't generated any sales, and the company reported a non-GAAP operating loss of $98 million in the fourth quarter. That's not entirely unusual for new start-ups in similar industries. For example, some EV start-ups like Rivian and Lucid didn't have any sales when they went public (both do now) and are still burning through cash.
But Archer does have substantial funding. The company raised an additional $300 million from institutional investors just a few weeks ago, bringing its total liquidity to $1 billion.
Archer looks promising, but significant unknowns remain
I understand why investors are interested in Archer. The company is methodically achieving milestones, building new partnerships, and attracting potential customers. Unfortunately, the fact remains that Archer doesn't have any revenue.
As I mentioned earlier, some start-ups go public and don't have sales. That's fine temporarily, as long as there's a product to sell shortly thereafter. Archer says it expects to have sales from its aircraft later this year, but investors buying the stock now will have to take Archer's word for it.
Making matters worse, Archer's share price jumped 65% over the past year, which means investors are paying much more for the stock than before, without any solid financial growth. The company has a price-to-book multiple of 9, which is a hefty premium considering Archer's long-term prospects are still...up in the air.
I don't think there's enough to go on yet to invest in Archer. Investors will get more insights if sales materialize later this year, but I feel comfortable sitting this one out until I see several quarters of solid growth.
