Archer Aviation (ACHR +4.31%) has been a divisive stock ever since it went public by merging with a special purpose acquisition company (SPAC) in September 2021. The bulls expected the electric vertical take off and landing (eVTOL) aircraft maker to revolutionize short-range flights, but the bears believed it would struggle to ramp up its production and narrow its losses.
Archer's Midnight aircraft can carry a single pilot and four passengers, travel up to 100 miles on a single charge, and achieve a maximum speed of 150 miles per hour. It's promoting these drone-like aircraft as a greener, cheaper, and easier-to-land alternative to traditional helicopters.
Image source: Archer Aviation.
However, Archer's future in the U.S. hinges on the Federal Aviation Administration's full approval of its commercial flights. Let's dig deeper into that closely watched certification process and see how it could help Archer's stock lift off over the next few years.
A brief history of Archer's business
Before Archer went public, it claimed it could produce 10 Midnight aircraft in 2024, 250 aircraft in 2025, 500 aircraft in 2026, and 650 aircraft in 2027. It claimed its revenue could surge from $42 million in 2024 to $3.44 billion in 2027 as it scaled up its business.
But like many other SPAC-backed start-ups, Archer overpromised and underdelivered. In 2024, it finally delivered its first test aircraft to the U.S. Air Force but didn't generate any meaningful revenue. As of this August, only six of its commercial aircraft were in production. Analysts don't expect it to generate any revenue this year as its net loss widens to $605 million.
That situation might seem grim, but Archer still has a massive backlog of $6 billion lined up with pending orders from big customers like United Airlines, Future Flight Global, Soracle, Ethiopian Airlines, Abu Dhabi Aviation, and the U.S. Air Force. Its top investor, Stellantis, will also help it manufacture its aircraft.
NYSE: ACHR
Key Data Points
The FAA approval could be a game changer
Yet Archer's customers can't launch their first air taxi routes without the FAA's approval. Archer must obtain four separate FAA certifications: a maintenance and repair certificate, an air carrier and operator certificate, a type certification (which includes its final airworthiness criteria, compliance, and flight tests), and a production certification.
As of this writing, Archer has only obtained the maintenance and repair certification and the air carrier certification from the FAA. Its type certification has cleared the final airworthiness criteria phase, but it just started the compliance phase and is preparing to launch its final flight tests. Its production certification also remains in progress.
Archer hasn't offered a clear timeline for that certification process yet, but some analysts don't expect it to achieve its final type certification until 2028. However, the FAA's new eVTOL Integration Pilot Program, which was introduced this September, might speed up that process by directly supervising its test flights with its top airline customers.
What investors should keep an eye on
Analysts expect Archer's revenue to surge from nothing in 2025 to $62 million in 2026 as it ramps up its production, delivers its first commercial aircraft, and launches its first air taxi services in Abu Dhabi (which were originally scheduled for late 2025). But they also expect its net loss to widen to $723 million as its production and operating costs soar.
That's a shaky situation for a company that ended its latest quarter with just $1.64 billion in cash, cash equivalents, and short-term investments -- so it will likely need to raise more cash with more secondary offerings to stay solvent. It has already increased its outstanding shares by 171% since its public debut, and that dilution should continue for the foreseeable future.
With a market cap of $5.26 billion, Archer still looks expensive at 85 times next year's sales. But assuming it successfully scales up its business and makes more progress with its FAA certifications, analysts expect its revenue to surge to $306 million in 2027. It isn't cheap at 17 times that estimate, but it could grow much larger as the nascent eVTOL market expands.
Yet Archer is still a speculative stock. It hasn't proven its business model is sustainable, it's burning cash, and it faces stiff competition from Joby Aviation, which produces faster and more energy-efficient eVTOL aircraft with its in-house components. A full FAA certification would be a major milestone for Archer -- but it won't solve all of its long-term problems.
