Is Archer Aviation the Smartest Investment You Can Make Today?

Key Points

• Archer Aviation hasn’t generated any revenue yet.

• But it’s sitting on a big backlog that nearly matches its market cap.

• It plans to significantly expand its business over the next few years.

• 10 stocks we like better than Archer Aviation ›

Archer Aviation (NYSE: ACHR), a developer of electric vertical take-off and landing (eVTOL) aircraft, has seen its stock soar more than 180% over the past 12 months. That rally was driven by the market's enthusiasm for the nascent eVTOL market, but the company hasn't actually generated any revenue yet and continues to rack up steep losses.

Should you hop on that bandwagon and expect the stock to soar? Or is too much growth already baked into its market cap of $6.6 billion?

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Archer's Midnight eVTOL aircraft. Image source: Archer Aviation.

What does Archer Aviation do?

Archer's Midnight eVTOL aircraft can carry a single pilot and four passengers. It travels up to 100 miles on a single charge with a maximum speed of 150 miles per hour. Its drone-like design makes it easier to land in crowded urban areas than traditional helicopters.

Many companies, including United Airlines (NASDAQ: UAL), Future Flight Global, Soracle -- a joint venture between Japan Airlines (OTC: JAPSY) and Sumitomo (OTC: SSUM.F) -- Ethiopian Airlines, and Abu Dhabi Aviation, plan to use the Midnight for their air taxi services.

Archer also plans to launch its own air taxi service within the next two years, and it will be the official air taxi services provider for the 2028 Summer Olympics in Los Angeles.

One of Archer's biggest investors is the automaker Stellantis (NYSE: STLA), which hired it as the contract manufacturer for its own eVTOL aircraft. Archer also holds a contract with the U.S. Air Force. It delivered its first aircraft to the Air Force for testing purposes last year, and it expects to deliver five more under that contract over the next few years.

When will Archer start to generate revenue?

Before Archer went public by merging with a special purpose acquisition company (SPAC) in 2021, it claimed it would deliver its first 10 eVTOLs and generate $42 million in revenue in 2024. But it didn't generate any revenue last year as it racked up a net loss of $652 million.

That big miss was disappointing, but Archer expects to ramp up its production to 10 aircraft in 2025, 48 aircraft in 2026, 252 in 2027, and 650 in 2028. With a backlog of about $6 billion, there's plenty of pent-up demand.

Archer's manufacturing partnership with Stellantis, its new AI partnership with Palantir to optimize its manufacturing and aviation systems, and fresh rounds of funding could help it achieve those ambitious goals. But it has also more than doubled its number of outstanding shares since its public debut, and that dilution will likely continue as it subsidizes its salaries with big stock bonuses and issues more shares to fund its acquisitions.

How much bigger could Archer grow?

For 2025, analysts expect Archer to generate just $1.4 million in revenue as it delivers its first Midnight aircraft in Abu Dhabi. Assuming it ramps up its production and the Federal Aviation Administration (FAA) finally approves its first commercial flights in the U.S. this year, analysts expect its revenue to surge to $103.4 million in 2026 and $450.8 million in 2027.

From 2024 to 2030, MarketsandMarkets estimates the eVTOL industry will have a compound annual growth rate (CAGR) of 35.3%. From 2031 to 2035, it expects a CAGR of 27.6%. If Archer can scale up its business, match analysts' revenue expectations, and continue to grow its top line at a CAGR of 30% from 2027 to 2035, its annual revenue could hit $3.7 billion by that final year. It could also finally turn profitable as economies of scale kick in.

If the company achieves that explosive growth and trades at a reasonable 10 times sales by 2035, its market cap could rise nearly sixfold to $37 billion. It could grow even faster if it acquires its closest competitor, Joby Aviation, and its other smaller industry peers.

Is Archer the smartest investment you can make today?

Archer is still a speculative stock, but it could have a bright future. That might be why its insiders bought nearly seven times as many shares as they sold over the past 12 months. It's still risky, and I probably wouldn't call it the smartest investment you can make today, but it could be a good long-term play for daring growth investors.

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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.