Contemplating Purchasing Archer Aviation Shares? Here are Three Crucial Points to Consider
Among the most thrilling innovations in the stock market right now is electric vertical takeoff and landing (eVTOL) aircraft. These vehicles, designed for short-distance urban travel, possess the ability to disrupt the urban transportation market.
Two corporations are spearheading the progress in this development phase technology: Archer Aviation (ACHR -5.03%) and Joby Aviation. Joby holds the upper hand with a market capitalization of $5 billion contrasting Archer's $2 billion. However, Archer has experienced a 61% surge in the last month due to its $500 million intended acquisition agreement with Japan Airlines and its third-quarter results demonstrating growth toward commercial launch.
Investors considering purchasing Archer Aviation stocks after the rally are not alone, but let's evaluate three key aspects to consider before making the plunge.
1. Archer generates no revenue
As a development-phase company, Archer does not bring in revenue. It concentrates on two primary business sectors it considers mutually beneficial. Initially, it intends to run its urban air mobility (UAM) system, essentially functioning as an airborne ride-hailing service with its own app-based platform, aiming to be price-competitive with existing ride-sharing services such as Uber Technologies.
Archer plans to take off and land at vital locations, dubbed 'vertiports,' which can encompass airports and other viable locations in metropolitan areas. This enables them to replace a one- to two-hour drive with a 10- to 20-minute flight.
The company also sells its aircraft to third parties. It has secured a conditional purchase agreement worth $1 billion with United Airlines and signed the Japan Airlines deal mentioned earlier. It has also secured a contract worth up to $142 million from the U.S. Air Force and established a strategic partnership with Stellantis, the maker of Chrysler, Dodge, and Jeep vehicles.
2. eVTOLs receive FAA approval
eVTOLs represent the first new category of civil aircraft since the helicopter in the 1940s, yet the FAA has granted its approval to this new mode of transportation with a final set of safety regulations in October, contributing to Archer's recent gains.
This new set of regulations significantly reduces the cost of flight training for companies like Archer and Joby, whose vehicles accommodate one pilot and up to four passengers. With support from regulators in place, the main challenges in deploying this new transportation appear to be ensuring safety and commercializing the technology by creating a customer base. Archer aims to begin providing rides as early as 2026, initially focusing on the Los Angeles metro area.
3. Market size remains unclear
The closest existing comparable to eVTOLs currently is the helicopter, but Archer and its peers argue that its transportation offers a significant improvement over helicopters. According to Archer, its aircraft are safer due to their multiple small propellers, making a single point of failure unlikely. They are also much quieter for this reason, producing less noise. Additionally, the vehicles are electric, making them emission-free.
However, the market size for this new form of transportation remains uncertain. Archer's annual report references Morgan Stanley data, suggesting that the addressable market for urban air mobility will reach $1 trillion by 2040, but this essentially appears to be a speculative estimate for an uncommercialized technology. eVTOLs could also face competition from robotaxis, like those Tesla plans to introduce.
By comparison, the helicopter services market was estimated at $29 billion in 2024. Furthermore, concerns surrounding its commercialization persist, including determining how many passengers they can transport and how they compete in terms of both price and convenience with rideshare companies such as Uber.
In conclusion, investors need to comprehend that Archer Aviation represents high risk, and it must surmount numerous challenges, such as commercializing the technology and outperforming competitors, as multiple aspiring eVTOL companies exist.
Nonetheless, if this new mode of transportation becomes popular, Archer Aviation's upside potential is substantial.
- Given Archer Aviation's focus on generating revenue through its urban air mobility system and aircraft sales, intelligent investors might consider allocating a portion of their finance portfolio to purchase Archer's stocks, taking into account the potential risks and rewards associated with this innovative company.
- For those who are intrigued by the possibilities of investing in the eVTOL market, it's crucial to keep an eye on future developments concerning the FAA's approval of these vehicles and the potential market size, as favorable advancements could significantly impact the financial returns and overall success of companies like Archer Aviation in this emerging sector.
