Could Archer Aviation Potentially Make Millionaires?
Archer Aviation's shares (ACHR 6.01%) have seen a significant surge, approximately 40%, within the past month. The majority of this increase occurred shortly after the company unveiled its third-quarter 2024 financials.
The financial report was generally positive, yet investors should keep in mind the ongoing risks involved with Archer and its shareholders.
Archer's Update Was Packed with Positives
Looking at the bigger picture, Archer aims to pioneer a new kind of aircraft. They're targeting an electric vertical takeoff and landing (eVTOL) short-haul aircraft, which they intend to use to establish a whole new transportation business - air taxis.
While Archer is not the only company working on such a project, they're making significant strides towards achieving these goals. This became evident in the third-quarter report.
Highlights from Archer Aviation's earnings announcement provide a compelling account.
- The company anticipates completing its factory in the near future, aiming to manufacture pilot-operated aircraft for testing and early commercial use by 2025.
- Archer reported they're nearing the end of phase 3 of the Federal Aviation Administration (FAA) approval process while accelerating phase 4, the final step required to secure certification.
- Management revealed the formation of a consortium led by the Abu Dhabi Investment Office aimed at launching commercial air taxi services in the United Arab Emirates as early as the fourth quarter of 2025.
- Lastly, they entered into a partnership with Oracle - a joint venture between Japanese Airlines and Sumitomo - with a potential order of up to $500 million. This increased the total value of customer-indicated orders to $6 billion.
Most companies highlight their accomplishments and downplay challenges in such reports. However, it does appear that Archer is nearing its objectives, contributing to the rapid stock growth following the earnings release.
A Millionaire's Dream Requires More than One Successful Report
Regrettably, all this positive news is just a precursor to actually having a product ready for sale. Archer has yet to reach this point, though they're getting closer.
While this optimistic news is welcome, there are numerous impediments to overcome before Archer transforms into a financially sustainable business. Analyzing the reverse side of the bullet points above can offer a helpful caution.
For example, while the factory is almost complete, additional investment is still necessary before it can fully operate. Then there's the usual workarounds and challenges that surface when a new factory opens for business.
Even if everything runs smoothly, the factory will initially be producing test aircraft. It's an essential step, but this leading investment isn't the end goal.
Next, there's the phase 3 and phase 4 FAA approval process. Archer is progressing with these initiatives, but a substantial amount of time and money is yet to be invested in an undertaking that might, in the end, not secure final approval.
The consortium with the UAE and the deal with Oracle point to a promising market potential, including a backlog valued at $6 billion. This foreshadows what could be Archer Aviation's future if their aircraft gets approved, tested, and adopted for use as air taxis.
However, all these factors must align, including the general public's acceptance of air taxis - a concept yet to prove its commercial viability and long-term sustainability.
Archer Aviation Presents an Aggressive Investment Opportunity
Could Archer Aviation potentially create a few millionaire investors through accelerated growth investment? Possibly, if everything turns out as planned.
However, this stock may not be suitable for conservative investors until Archer surpasses a few more critical milestones. Therefore, you need a very optimistic outlook on the company's long-term prospects to invest in Archer Aviation.
Investors should consider the ongoing financial risks associated with Archer Aviation, despite its recent share price surge, as the company is still working towards becoming a financially sustainable business.
The positive financial report and significant achievements in manufacturing, FAA approval process, and partnerships with major players in the industry have attracted investments, indicating that Archer Aviation's growth potential is considered an aggressive investment opportunity.
