Archer Aviation: a speculative bet on the future of aviation
Archer Aviation $ACHRfocused on electric vertical takeoff and landing (eVTOL) aircraft, is experiencing dramatic growth. Its stock is up 360% from its all-time low, thanks largely to rising orders, strategic partners and optimistic production plans.
Why is Archer Aviation stock rocketing?
Aircraft eVTOL technology
- Midnight eVTOL: electric aircraft for 4 passengers + pilot
- Speed up to 150 mph, range of 100 miles
- Lower operating costs than helicopters
- Deployable in cities (air taxi)
Strategic partnerships and orders
- United Airlines: order for 200 aircraft
- Japan Airlines and Sumitomo: 216 aircraft in total
- US Army: $142 million contract
- Stellantis (car manufacturer): strategic investor and manufacturing partner
Ambitious expansion plan
- 2025: launch of an air taxi service in the UAE
- 2025-2028: gradual increase in production from 10 to 650 aircraft per year
- Revenue estimate 2027: USD 471 million
Strong financial position
- US$1 billion in cash for development
- Insiders (management) buy 11x more shares than they sell
US government support
- Faster regulatory approval of eVTOL aircraft
- Possible military applications of this technology
Risks and challenges
$ACHR is still a not-for-profit company
- Will not generate positive cash flow for several years
- Need to raise additional investment for development
Production targets are extremely ambitious
- Increase production from 10 aircraft in 2025 to 650 in 2028
- Risk of production delays and technical problems
- Competitive pressure (Joby Aviation, Lilium, Vertical Aerospace)
- Dependence on regulatory approvals and infrastructure
Reasons for optimism:
Revolutionary eVTOL technology
Strong investors and early customers
Ambitious but realistic growth plan
Relatively low valuation relative to potential
Reasons for caution:
Still a loss-making company
Production at scale may be a problem
Risk of high stock volatility
Archer Aviation is not for conservative investors, but for those who are willing to take risks with the prospect of huge profits in the future. If the eVTOL market succeeds and Archer meets its goals, it could become a leader in the new era of urban aviation.
The stock has had a sharp rise, but has recently fallen significantly. There will be a lot of those orders and the company definitely has room to grow, so I would be comfortable buying now.
Very interesting business and the company should do well with such orders. The stock is not even extremely overvalued. For now, I'm just adding the stock to my watchlist and will keep an eye on how it does this year.