In October, the Federal Aviation Administration (FAA) unveiled final rules for power-lift pilot certification and operations, setting the stage for the commercialization of advanced air mobility, often referred to as flying taxis. This regulatory move marks the latest chapter in the development of these flying innovations, which hold the potential to revolutionize how we think about urban transportation.
One key player in this field is Archer Aviation, which trades under the symbol ACHR and recently saw its stock rise by 1.94%. Archer is gearing up to launch commercial operations in the United Arab Emirates within this year. Moreover, the company is expanding its horizons by pursuing opportunities as a defense contractor—a move that could open up significant revenue streams.
The industry’s positive momentum has certainly rubbed off on Archer, as evidenced by a noteworthy 82% increase in its stock price over the last year. As you continue reading, we’ll explore whether adding this stock to your investment portfolio might be a savvy decision.
Flying Taxis Advance with Regulatory Support
Advances in battery technology are bringing the dream of flying taxis closer to reality. Archer Aviation is at the forefront of developing electric vertical takeoff and landing aircraft, or eVTOLs. These vehicles are ideally suited for navigating urban landscapes because of their maneuverability and reduced noise levels. Unlike helicopters, eVTOLs can operate more quietly and with less environmental impact due to their electric motors.
Since 2018, Archer has been hard at work on its aircraft, making significant strides toward commercial operation. A crucial step in this journey is obtaining the Federal Aviation Authority (FAA) Type Certification—a badge that certifies the aircraft’s safety and airworthiness.
Last year, Archer’s flagship Midnight aircraft completed a successful transition flight. It took off vertically, shifted from hover to wing-borne flight, and cruised at over 100 miles per hour before landing smoothly. Archer is about three-quarters of the way through the certification process and anticipates crossing the finish line by late 2025.
In December, the company completed its massive 400,000-square-foot manufacturing facility in Covington, Georgia. The plan is to kick off production early this year and scale up to producing two aircraft per month by the end of 2025.
Archer has also entered a multiparty collaboration agreement with entities in the United Arab Emirates and Abu Dhabi, with hopes of launching air taxi services in the UAE as soon as the fourth quarter of this year.
Strategic Partnership with Anduril Enhances Defense Prospects
A recent partnership with Anduril, a company known for its work in autonomous defense systems, has caught investors’ attention. Anduril’s focus is on technology for the Department of Defense, ranging from unmanned aerial systems to intelligent air vehicles designed for various mission-critical tasks.
Early next year, Anduril outpaced major defense contractors like Boeing, Lockheed Martin, and Northrop Grumman to push forward the U.S. Air Force’s Collaborative Combat Aircraft program. As part of its new Archer Defense program, Archer will collaborate with Anduril to develop hybrid-propulsion VTOL aircraft meant for cutting-edge defense applications.
According to analysts at Deutsche Bank, this venture could potentially generate billions, "significantly boosting Archer’s growth potential." In December, Archer bolstered its capital by raising $430 million through additional equity, aimed at supporting the growth of its defense initiatives.
Is Archer Aviation a Good Fit for Your Portfolio?
Archer’s dual focus on defense and air taxis is still in its early phases, and the company currently isn’t generating revenue nor is it close to achieving positive cash flow. This positions it as a higher-risk investment option, more suited to investors with a taste for growth opportunities and a higher tolerance for risk.
However, there’s much to like about Archer’s long-term prospects. With an impressive order book of $6 billion, commercial operations might kick off in the UAE later this year and in the U.S. next year. The potential market size is enormous, with projections from Morgan Stanley suggesting that the urban air mobility market could hit a staggering $1 trillion by 2040.
If you’re considering an investment in Archer Aviation, a cautious approach is advisable. A savvy strategy might involve purchasing a modest amount of shares now and continuing to invest incrementally as the eVTOL company makes further progress with its FAA Type Certification, scales up production, and advances its defense initiatives.
