Valued at $5.8 billion and with more than $1.5 billion in cash, Archer Aviation (ACHR 4.36%) is the world's second largest builder in the nascent industry of air taxis -- smaller than Joby Aviation (JOBY 4.59%), but miles ahead of Vertical Aerospace or Lilium. That's quite impressive, considering Archer was only founded in 2018, compared to Joby, which established itself in 2009.
But it's not enough to make Archer Aviation stock a near-term buy.
Image source: Getty Images.
Get to know Archer Aviation
Archer already has an electric-powered, vertical takeoff and landing (eVTOL) aircraft in the works. Flying at 150 mph, its 12-engine "Midnight" eVTOL will carry four passengers and a pilot on trips of 20 to 50 miles, and can recharge between flights in "minutes."
The company is in the process of getting Midnight certified to fly passengers commercially, with two of its three FAA-mandated certifications (for "type" and for "production") said to be "in progress" currently. United Airlines supports its work, having invested in the company and already placed a $1 billion order for 200 aircraft.
Two years ago, Archer CEO Adam Goldstein told me the company planned to use Midnight aircraft to compete with Uber Technologies for customers riding to and from major airports, for example -- which explains United's interest. He also explained that obtaining Midnight certification will require at least $1 billion in cash to cover all the testing expenses -- and Archer has the funds to do so.
Archer went public during the SPAC IPO craze back in 2021. If that makes you wonder if the company was perhaps a bit under-baked for public consumption, well, you're right to wonder. For example, Goldstein said he expected Archer to be done with its certifications, flying, and generating revenue by 2025. With just days remaining in the year, though, that clearly hasn't happened yet.
Analysts hope Archer will be able to begin flying (in the UAE, if not yet in the U.S.) next year, but profits are still a long way off. Analysts polled by S&P Global Market Intelligence predict the company might turn free cash flow-positive by 2028 and earn its first profit in 2029.
Long story short, investors might need to wait another four years to learn if their investment in Archer will pay off.
A better way to profit from aerospace
Don't want to wait that long? Consider an investment in another cutting-edge aerospace technology stock instead: Rocket Lab (RKLB 4.99%). Operating at a higher altitude than Archer, Rocket Lab builds (surprise!) rockets -- the small Electron rocket that can carry about 300 kg to Low Earth Orbit and, coming soon, a Neutron rocket that can carry 13,000 kilograms -- and will be reusable to boot. The company also manufactures satellites and supplies parts to other companies to build their own satellites.
NASDAQ: RKLB
Key Data Points
Established in 2006, Rocket Lab first reached orbit in 2018, around the time Archer was just getting set up. It's grown rapidly since. Launching three times that first year and six times in 2019, Rocket Lab today is on course to send up more than 20 missions before 2025 is over -- and still growing. 2026 could see even more Electrons launch, as well as the debut launch of the company's new Neutron -- just in time to compete with a newly public SpaceX.
Best of all from an investor's perspective, Rocket Lab is on course to turn profitable before Archer does, thanks to all the new revenue its Neutron will produce. Analysts anticipate Rocket Lab will approach $880 million in sales next year, up 47% from the $600 million it should make this year, then grow another 38% in 2027.
This should be enough revenue to allow Rocket Lab to earn a positive profit that year -- $0.08 per share, say the analysts -- with nearly $76 million in positive free cash flow. And that would mean Rocket Lab won't need to sell any more stock or dilute its investors before it can sustain itself on its own cash flow. Profits could then more than triple between 2027 and 2028, and nearly double again by 2029.
While Archer cools its heels, awaiting FAA permission to get its business off the ground, Rocket Lab is already spreading its wings and flying higher. With multiple catalysts waiting over the next few years, Rocket Lab stock offers significantly better -- and nearer -- potential to generate life-changing gains for investors.
