Should One Consider Purchasing Archer Aviation's Shares?
For many years, people have dreamt about gliding through the skies in aircrafts that whisk you away to your desired destinations. However, this concept has yet to take flight, but with the advancement of technology, flying taxis are transitioning from sci-fi marvels to real-world possibilities - and they might be arriving in your city very soon.
Archer Aviation (ACHR -1.54%) is one of the pioneers in this field, and it's perfectly poised to lead the charge in this burgeoning sector. The company has made significant progress, and regulatory bodies have also made strides in establishing guidelines and regulations for this new mode of travel. Despite being a new entity, Archer Aviation still has some work to do before flying taxis become mainstream.
Here's what you should know if you're considering investing in the company now.
Archer wants to revolutionize urban transportation
Archer Aviation is leading the charge in a transport revolution with its cutting-edge electric vertical takeoff and landing (eVTOL) technology. The company aims to revolutionize urban travel with its Midnight aircraft, which is designed for vertical takeoff, landing, and hovering like a helicopter. Unlike traditional helicopters, eVTOLs use electric motors, resulting in a more efficient, quieter, and eco-friendly mode of travel that suits the urban jungle perfectly.
In early 2023, Archer achieved a significant milestone with a successful vertical transition flight of the Midnight. The aircraft climbed vertically before accelerating to speeds of over 100 miles per hour, seamlessly shifting from hovering to wing-borne flight, and returning for a smooth vertical landing.
By early September, Archer had completed a remarkable 402 test flights and had made substantial progress towards obtaining its Type Certification. This certification signifies that the Midnight meets stringent safety requirements, clearing the way for commercial flights.
Archer estimates completing the Type Certification by the end of 2025, followed by production certification, which will allow it to scale production.
The FAA is paving the way for air taxis
Last month, the Federal Aviation Administration (FAA) unveiled its final Special Federal Aviation Regulation (SFAR) tailored for powered-lift pilot certification and operations. This regulation paves the way for the commercialization of advanced air mobility (AAM) travel.
With the piloting training and certification processes now in place, the FAA is preparing for a secure and efficient operating environment for these innovative aircraft. Market analysts at Canaccord view the decision to finalize regulations before the election as a positive indicator for the air taxi industry.
What's next for Archer Aviation?
Archer recently entered into a Memorandum of Understanding with Southwest Airlines, aiming to establish operational plans for electric taxi networks at California airports. As part of this initiative, it plans to launch an air mobility network in Los Angeles by 2026.
But this is just the beginning - plans are underway to electrify key locations in the New York City metropolitan area, Northern California, and South Florida. Globally, Archer is looking at the United Arab Emirates, where it plans to initiate operations as early as 2025, and India by 2026.
The company has already demonstrated impressive momentum, with a backlog of 1,141 aircraft orders and significant pre-delivery payments at the end of the second quarter. The United Arab Emirates tops the list with 475 orders, followed by 300 from the U.S. and 200 from India.
On Nov. 7, Archer sealed a deal with Soracle, a joint venture between Japan Airlines and Sumitomo Corporation, to introduce AAM services in Japan. The agreement allows Soracle to order up to 100 aircraft, boosting its indicative order book to over $6 billion.
Is the stock a good buy?
Archer Aviation is an intriguing company developing an entirely new form of urban transportation. Its potential for growth is enormous, with Morgan Stanley projecting that the urban air mobility market could reach $1 trillion by 2040.
The company is still in its infancy, with no revenue and no commercial operations, leaving significant execution risk. Any issues in testing or manufacturing its aircraft could impact its timeline, delay revenue, increase costs, and potentially affect deliveries.
For this reason, Archer Aviation stock is ideal for high-risk investors with a long-term investment horizon. The stock remains speculative at the moment, as commercial operations and profitability are still years away. If you decide to invest, ensure it forms part of a well-diversified portfolio, and don't risk more than you're comfortable losing.
Investing in Archer Aviation could be an opportunity for those interested in the urban air mobility market, as the company is pioneering electric vertical takeoff and landing technology. With estimated market potential reaching $1 trillion by 2040, according to Morgan Stanley, the finance sector sees significant growth potential. However, it's essential to consider the high-risk nature of investing in a company with no revenue and no commercial operations yet, as any issues in testing or manufacturing could impact the timeline, revenue, and deliveries.
In terms of finance, the advancement of technology in the transportation sector is opening new investment opportunities, such as Archer Aviation, which is working on obtaining its Type Certification to bring electric air taxis to commercial markets soon. This transition from sci-fi marvels to real-world possibilities in finance could potentially bring significant returns for those who invest early.
