Archer Aviation (NYSE: ACHR), a developer of electric vertical take-off and landing (eVTOL) aircraft, hasn't impressed too many investors since it went public by merging with a special-purpose acquisition (SPAC) company on Sept. 20, 2021. The combined company's stock started trading at $9.40 per share, but it didn't initially go much higher and subsequently sank to an all-time low of $1.63 on Dec. 27, 2022.
Like many other SPAC-backed companies, Archer overpromised and underdelivered. In its premerger presentation, it claimed it would produce its first 10 aircraft in 2024. But it eventually only delivered its first Midnight aircraft to the U.S. Air Force last August. Rising rates also compressed its valuations and cast a harsh light on its steep losses.
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Image source: Archer Aviation.
Archer looked like it was in serious trouble, but its stock has bounced back to about $7.50. It recovered as it secured more contracts, attracted more funding from its investors, and set a clear production roadmap for the future. It's still a highly speculative stock, but it might just be a great buy right now, for six reasons.
1. Its technology is disruptive
Archer's Midnight eVTOL aircraft can carry one pilot and four passengers. They can travel up to 100 miles at a max speed of 150 miles per hour on a single charge. It promotes these drone-like passenger aircraft as a cheaper and greener alternative to helicopters that can be more easily landed in urban areas. That makes them well suited for short-range air taxi services.
2. It's attracted major customers and investors
Archer has only delivered one aircraft so far, but it's already attracted some big orders and investments. United Airlines ordered 200 of its Midnight aircraft in 2021, while Future Flight Global and Soracle, a joint venture between Japan Airlines and Sumimoto, ordered 116 and 100 of its aircraft, respectively, in 2024.
In 2023, automaker Stellantis invested in Archer and chose it as the exclusive contract manufacturer of its own eVTOL aircraft. That same year, the U.S. Department of Defense awarded it with contracts worth up to $142 million. That support could help Archer scale up its business over the next few years.
3. It has a clear roadmap for the next few years
By the 2025, Archer aims to launch its first air taxi services in the United Arab Emirates with Abu Dhabi Aviation. It plans to deliver its first "revenue-generating" Midnight aircraft, as opposed to its military orders from the U.S. Air Force, as part of that deal.
Looking further ahead, Archer plans to increase its annual production to 10 aircraft in 2025, 48 in 2026, 252 in 2027, and 650 in 2028. It intends to launch more dedicated eVTOL air taxi routes with its partners as it expands.
4. An eVTOL-friendly regulatory environment
Sean Duffy, a former lobbyist and Fox Business co-host, was sworn in as the new Secretary of Transportation under President Trump on Jan. 28. During his confirmation ceremony, Duffy said America was "in a race to beat the rest of the world" in drones, autonomous vehicles, and eVTOLs to usher in a "golden age" of transportation.
Those comments suggest Archer and other eVTOL makers, such as Joby Aviation , won't face significant regulatory hurdles as they expand their fledgling businesses. They could also attract more support from the U.S. military.
5. It looks reasonably valued relative to its growth potential
Analysts expect Archer's revenue to jump to $29 million in 2025, $151 million in 2026, and $471 million in 2027 as it finally ramps up its deliveries. With an enterprise value of $3.39 billion, it doesn't look terribly expensive at seven times its 2027 sales. It's expected to stay unprofitable for the foreseeable future, but it ended 2024 with more than $1 billion liquidity.
6. Its insiders are net buyers
Archer's number of outstanding shares has risen 127% over the past three years as it raised cash with more secondary offerings and covered its stock-based compensation. Its share count increased 70% in the past 12 months alone. That might seem like a red flag, but it isn't surprising, since Archer is still expanding its fledgling business.
More importantly, Archer's insiders aren't dumping those new shares. Instead, its insiders bought 11 times as many shares as they bought over the past 12 months. That warm insider sentiment suggests its downside potential is limited.
It's still a very risky investment
Archer's stock could remain volatile until it finally starts to hit its production goals. But if it does, it could skyrocket as more investors flock back toward the eVTOL market. It's definitely not a stock to buy as a core portfolio holding, but it's one worth accumulating with some cash that you can afford to set aside for a few years.
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
