Which Investment Option Yields better Long-term Growth: Archer Aviation or Rocket Lab USA, Inc.?
Progressive investments in groundbreaking businesses can bring substantial profits for intelligent investors who spot trendsetters early. The task lies in uncovering these prospects before the general market has adjusted their worth based on their prospects.
Two ascending aerospace ventures elegantly exemplify this situation. In 2024, one of these enterprises saw a surge in value following a series of crucial accomplishments, while another has only just begun to garner interest from investors.
Specifically, shares of Rocket Lab USA, Inc. (RKLB -3.31%) have skyrocketed 392%, while Archer Aviation, Inc. (ACHR -10.02%) has climbed 82% year to date, as of Dec. 27, 2024. Let's study their fundamental strengths and growth trends to ascertain which innovator promises superior profits over the subsequent five years.
Chart data from YCharts for ACHR.
Spatial dominance commands an added premium
Rocket Lab has gained prominence in launching miniature satellites, with Electron now ranking as the worldwide third most frequently deployed rocket in 2024. The firm's increasing revenue and substantial order backlog testify to strong client demand, primarily from commercial satellite operators and governments seeking dependable space access.
Beyond launch services, Rocket Lab continues expanding its space-technologies division, manufacturing vital satellite components and spacecraft for NASA and other clients. Although the development of its larger Neutron rocket has the potential to create new markets, a considerable portion of this anticipated growth seems already reflected in the current share price. Trading at 22.6 times 2025 projected sales after its remarkable climb in 2024, Rocket Lab commands a lofty premium compared to competitors in the aerospace sector.
Pioneering aerospace and defense
Archer spearheads the new breed of electric vertical take-off and landing (eVTOL) aircraft developers targeting to revamp urban transportation. The company has forged essential collaborations with Stellantis for manufacturing expertise and United Airlines for commercial operations, assuring a route to market.
A recent alliance with defense technology innovator Anduril signals a potential shift. This collaboration transcends mere military applications, blending Archer's innovative aircraft design with Anduril's groundbreaking autonomous systems and artificial intelligence features. The result could redefine military aviation, in part through autonomous operation and advanced battlefield awareness.
The partnership becomes even more noteworthy due to Anduril's deep connections within the defense sector and record of securing large government contracts. This partnership enables Archer to simultaneously target both commercial and military markets, a dual-pronged approach that could drastically accelerate the eVTOL pioneer's growth momentum.
Distinct paths to value creation
Although Rocket Lab has demonstrated its business model's success, capturing substantial market share in space launches and systems, this accomplishment comes with a price. The stock's remarkable gains in 2024 imply that the majority of its near-term growth potential has already been factored into its value.
Archer presents a contrasting value proposition despite its positive returns in 2024. The market appears slow to apprehend the full extent of its Anduril partnership, particularly its potential to bolster technological development and boost market adoption. Fusing urban air mobility and autonomous military systems creates multiple avenues for value generation.
Better aerospace investment opportunity?
Even though both companies lay the groundwork for the future of aerospace, their profit potential varies substantially. Rocket Lab's success has been handsomely rewarded by the market, potentially capping near-term gains. Archer, despite its gains in 2024, still appears undervalued due to its dual commercial and military strategies.
The Anduril partnership, in particular, positions Archer as a potential frontrunner in autonomous military systems, a development that its current $5 billion market cap may not fully reflect. Defense contracts should likely contribute billions to its revenue stream over the next five years alone.
Consequently, Archer emerges as a more enticing growth opportunity for equity investors in this side-by-side comparison.
Investors looking to capitalize on the growing aerospace sector might find Archer Aviation, Inc. a promising option. Despite its impressive 82% year-to-date growth, its stock price may not fully reflect its potential due to the market's slow realization of its Anduril partnership's impact on technological development and market adoption.
Investing in Rocket Lab USA, Inc., on the other hand, could be more suited for those seeking a company with a more established presence in the aerospace sector. However, its current share price seems to have already factored in much of its near-term growth potential, making room for smaller returns compared to Archer.
