Archer Aviation (ACHR 3.90%) is an ambitious developer of electric vertical takeoff and landing (eVTOL) aircraft -- essentially flying taxis for short-distance travel.
Its battery-powered Midnight aircraft (as seen in the picture below) can take off vertically like a helicopter but flies forward on electric power. No gas, lower emissions. If Archer can succeed in producing them commercially, you might one day summon one through an app and cut through a city without wasting time in traffic.
Image source: Archer Aviation.
Archer's vision could evolve into a multibillion-dollar business with thousands of these aircraft carrying passengers in cities across the world. Indeed, Morgan Stanley once estimated the urban air mobility market could reach $9 trillion by 2050.
The problem, however, is that Archer still lacks regulatory approval, and investor sentiment on its future appears to be souring. Its stock trades at just over $5 a share, its lowest point in the last 52 weeks.
NYSE: ACHR
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At such a low price price, the question naturally arises: Could buying Archer today set you up for life? Or will this high-risk bet never leave the ground?
A $6 billion vision, still waiting for takeoff
If you only look at the recent floundering of Archer Aviation stock, you might miss what's actually happening behind the scenes. The company, though still pre-revenue and burning cash, has been making tremendous progress toward putting its air taxis in a sky near you.
In the beginning of March, for instance, Archer announced that its partners in Texas, Florida, and New York were selected for the White House's eVTOL Integration Pilot Program -- a huge step toward helping the company obtain regulatory approval for flying its craft commercially.
In a nutshell, the partnership means Archer can start prepping for flights across those states by putting infrastructure in place and staffing local teams.
This doesn't, of course, mean Archer will taxi paying passengers in those states -- yet. But getting a head start on infrastructure could make all the difference when that approval finally comes.
In the meantime, Archer's cash situation is still precarious. Its net losses are widening, and building infrastructure right now will exacerbate this pre-revenue start-up's cash-burn rate, which is already significant.
Data by YCharts
Archer claims it has a $6 billion backlog. It's hard to gauge, however, how much it will pocket after it factors in costs of production, such as manufacturing enough Midnight craft to meet demands.
Will buying Archer today set you up for life?
Right now, Archer carries a roughly $3.7 billion market cap. If the stock were to grow 100-fold from here -- a truly life-changing yield -- it would carry a $370 billion market valuation. For perspective, Uber's market cap is currently about $145 billion.
It wouldn't be impossible for Archer to grow like this, but it would need to dominate the global eVTOL market. That means it would need to beat rival Joby Aviation, or at least make Joby as small a competitor as Lyft is to Uber.
Personally, I don't think Archer will grow 100-fold. But it might grow tenfold, or 20, from here. Archer may not make you rich overnight, but, if it executes, it could reward investors over the next decade.
