Archer Aviation (ACHR), a pioneer in the emerging air taxi industry, is generating anticipation and excitement among investors and has helped its stock rise over 90% in the past month. Its innovative drone-like electric vertical take-off and landing (eVTOL) aircraft are ushering in a revolution in urban transportation. This shift in transportation is expected to grow into a massive $9 trillion market by 2050, with Archer’s first-mover status making it a potential early-stage heavyweight in this industry.

Despite its pre-revenue status and a potentially long wait for positive cash flow, Archer’s promising position as a front-runner in the eVTOL market is supported by a $6 billion backlog and a $65 million production facility in Georgia. Additionally, significant partnerships make it an enticing prospect for patient investors with a long-term perspective and an appetite for high risks and potentially high rewards.

Archer is making significant progress

Archer has made significant progress in bringing its electric vertical take-off and landing (eVTOL) aircraft to market. Its flagship aircraft, Midnight, successfully demonstrated its capabilities in a transitional flight, demonstrating its speed, versatility and landing precision. This highlights the company’s potential to offer a quieter and less polluting alternative to traditional helicopters, particularly in urban environments.

The company is currently undergoing certification, a crucial step for commercial flight operations. The FAA’s type certification process is currently in Phase 3, with a focus on accelerating the transition to Phase 4, the final phase required to receive a type certification. After completing three of the four required steps, Archer expects to achieve full certification by the end of 2025.

Short-term plans and partnerships

Archer is also currently working on production certification for mass production of the Midnight. Completion of a production facility is imminent and will be primarily dedicated to the production of prototype design piloted aircraft for testing and early commercial use. The goal is to ramp up operations and produce up to 650 aircraft per year by 2025.

To prepare its air taxis, Archer is working with key players such as Southwest Airlines (LUV) and Signature Aviation and plans to build electric air taxi networks and electrify 200 airports in the US. In addition, Archer is working with a consortium led by the Abu Dhabi Investment Office (ADIO) established to establish commercial air taxi services in the UAE as early as the fourth quarter of 2025. Finally, Archer has partnered with a joint venture between Japan Airlines (JPNRF) and Sumitomo Enterprise Company (SSUMF). This deal includes a planned order for Midnight aircraft worth a total of up to $500 million.

Archers Current financial results and outlook

The company recently reported financial results for the third quarter of 2024. Total operating expenses for the quarter were $122.1 million, resulting in a net loss of $115.3 million, or a loss per share of $0.29.

ACHR management has issued guidance for the fourth quarter of 2024, estimating total operating costs of $95 million to $110 million.

Conclusion on ACHR

The stock has been very volatile (beta of 2.8) as it has responded to fluctuations in investor sentiment over the past few years, suffering a slight loss of 1% during this time. It is trading near the top of its 52-week price range of $2.82 to $7.02 and is showing continued positive price momentum as it is above all major moving averages.

In recent bullish news, Needham analyst Chris Pierce is beginning coverage on Archer with a Buy rating and $11 price target on ACHR’s shares. In his research note, he notes that industry momentum has “leaved the hangar” and confidence has increased that Archer will deliver on its $6 billion worth of aircraft backlog. Although this is a long-term investment story, short-term catalysts (regulatory approvals, first passenger flights) should boost confidence in the longer-term opportunities.

Based on recent recommendations from four analysts, Archer Aviation is rated an overall Strong Buy. The average price target for ACHR stock is $9.38, representing a potential upside of 55.30% from current levels.

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