Archer Aviation (ACHR 2.52%) is trying to break into the aerospace industry, which is dominated by a few large companies. That's an audacious goal, but the company is using new technology to gain a foothold that could, realistically, leave it as a leading provider of air taxis. If you are an aggressive investor, buying now could be a no-brainer move that gets you in before the good news really starts to roll for this growth stock.
What does Archer Aviation do?
Archer Aviation builds an aircraft it calls Midnight. Midnight isn't a competitor to the types of planes that carry passengers from city to city around the world. It is a vertical lift plane that can only carry a few passengers at a time and that can only travel relatively short distances. While most airplanes today are more comparable to long-distance buses, Archer Aviation's Midnight aircraft is like a city taxi.
Image source: Getty Images.
The big benefit of an air taxi is that it can carry passengers over congested city streets. Most people probably won't find the expense of an air taxi worth the time they could save. However, it is likely that there will be many wealthier individuals that will find the time savings on offer well worth the cost. Archer Aviation already has plans for air taxi services in New York and California, with it pegged to be the official air taxi service of the 2028 Olympics.
Before getting too excited about 2028, the truth is that, at this point, that's a bit of an aspirational goal. Right now Archer Aviation doesn't have any of its Midnight aircraft acting as air taxis in commercial operation anywhere in the world. It is still a money-losing start-up that is attempting to get regulatory approval for its Midnight aircraft.
The Middle East is where the action is
Don't write Archer Aviation off, however. The stock is up over 100% over the past year. That's not a random price move, there has been some notable good news. That includes slow and steady progress on the FAA approval front. But it also includes the signing of multiple agreements to start air taxi services outside of the United States.
The first one is planned in Abu Dhabi, with Midnight aircraft already being tested in that market. Archer Aviation is planning to use this setup as a blueprint for future air taxi services. Right now it has potential deals lined up in Ethiopia and Indonesia. So once the business model is proven out in Abu Dhabi, it seems highly likely that the next air taxi services will be far easier to get off the ground.
That all leads back to the U.S. market. This is likely to be where Archer Aviation has the most opportunity for growth. It can't even begin to tap that opportunity until it receives FAA approval. But progress is being made, with management noting that it expects the approval process to start picking up steam from here on out. In other words, Archer Aviation is quickly starting to look like it has a real business.
Archer Aviation is a high risk/high reward investment
Archer Aviation is not for the faint of heart. It is still a money-losing upstart that will likely continue to lose money for a few more years. But it looks like the air taxi concept is on the cusp of going from a good idea to a real thing. And that means that Archer Aviation is about to move from a good idea to a company with attractive long-term growth prospects. As long as you can handle the risk, buying now, before the company's business "takes off," could be a no-brainer move.
