The race for urban air mobility is getting intense, with flying taxi companies vying for superiority. Archer Aviation (NYSE:ACHR) is one of the leading contenders because its electric vertical takeoff and landing (eVTOL) aircraft offers a competitive advantage over its rivals.
The global eVTOL market is growing at an expected compound annual rate of over 12% through 2032. It’s expected to hit $35.9 billion. Compared to the projected $1.1 trillion global airline industry by 2030 or even the $215.7 billion ride-hailing projected market by 2028, it’s a drop in the bucket. Yet, this is an industry truly in its infancy that could have a major impact on travel.
Archer Aviation is an early-stage leader poised to capture a significant share of this emerging market. ACHR stock represents a ground-floor opportunity to get in on what promises to be a seachange in short-haul flying.
Evtol Travel Is About To Take Flight
Archer is aiming for commercialization status beginning in 2025. Its Midnight eVTOL craft received Special Airworthiness Certification from the Federal Aviation Administration (FAA) in August. That means the Midnight met all safety requirements necessary to begin flight test operations. There’s still a labyrinth of additional regulations and certifications to go through, but Archer is on schedule to meet its launch date next year.
To help ensure a smooth transition from concept vehicle to commercial service, the flying taxi stock established key industry partners. Boeing (NYSE:BA), United Airlines (NASDAQ:UAL) and Stellantis (NYSE:STLA) are some of the giants in aerospace and automobiles backing Archer. They provide important financial backing, technological synergies and market access for the eVTOL company. Of equal importance, they also enhance Archer’s credibility and reputation in the intensely competitive eVTOL space.
What potentially sets Archer apart from rivals such as Joby Aviation (NYSE:JOBY), Lilium (NASDAQ:LILM) or even China’s Xpeng (NYSE:XPEV) is its focus on cost-effectiveness and user- and community-friendliness. Archer’s Midnight design is quieter, faster, and more efficient than helicopters. The craft produces just 45 decibels of sound. That’s almost 100x quieter than a helicopter but also less than a car or normal conversation. Having them flit in and out of urban areas will be less disruptive than traditional craft or autos. They’re also more eco-friendly and can recharge in just 12 minutes.
Archer Aviation also plans to launch eVTOL services in the United Arab Emirates and India by 2026, tapping into the high-demand markets in these regions.
Expect Turbulence
But don’t get ahead of yourself either. It’s still risky to invest in ACHR stock. Because Archer is still in the development stage, it produces significant losses. That’s expected, but regular cash infusions from strategic partners, dilutive stock sales or increased debt may be the norm. Fortunately, Archer has plenty of cash on hand ($461 million) and little to no current debt.
Yet, many are betting against the stock, with 21% of its outstanding shares sold short. It has a short interest ratio of 7.8 days, or how long it would take for a short seller to cover their position. Over seven days is considered a lot.
Archer was also able to diffuse a potential legal quagmire by settling a lawsuit from Wisk Aero, a joint venture of Boeing. It alleged Archer stole trade secrets and infringed on its patents. Archer agreed to exclusively use Wisk’s technology in future eVTOLs it develops, and Boeing invested financially in Archer to oversee the implementation of the agreement. But there could be other such litigation down the road.
Because this industry is so new, there are going to be hiccups. But Archer Aviation looks like a stock worthy of including in the riskiest portion of your portfolio.
On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
