Archer Aviation has developed an electric vertical take-off and landing aircraft.
The company is trying to pioneer a new sector of travel that it can scale in the U.S. and globally.
It's been a bumpy ride since Archer's stock went public in 2021, as it tries to achieve full certification from the U.S. Federal Aviation Administration.
Archer Aviation (NYSE: ACHR) is one of the few companies attempting to commercialize aviation for public transit in cities across the world. The electric vertical take-off and landing (eVTOL) company has developed its Midnight aircraft, which can hold four passengers and a pilot, and reach speeds of 150 miles per hour, turning hour-long trips into minutes.
The company plans to set up airpads in cities or at airports that it can fly commuters back and forth from.
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Commercial aviation for smaller-scale city travel is new and therefore must overcome many regulatory hurdles before receiving full certification from the U.S. Federal Aviation Administration (FAA), which the company hopes to achieve likely sometime next year.
Image source: Getty Images.
In September, the FAA announced an accelerated federal initiative, where cities in the U.S. can participate in supervised trials with companies like Archer, which many investors view as a key step toward full certification.
While Archer's prospects are quite exciting, investors should keep in mind that there is risk, with the stock already trading at an $8 billion market cap and still some way to go before generating revenue and profits. It's a big bet on Archer achieving commercialization and then gobbling up market share.
Archer began trading in September of 2021 and has been on a bumpy ride. The company went public by merging with a special purpose acquisition company (SPAC), and at the time, most SPACs were taking advantage of market conditions and going public at monster valuations. As a result, Archer's stock got hit hard for several years but has since recovered.
ACHR data by YCharts
As you can see, a $500 investment in Archer around the levels it traded at when going public would be worth about $657 now, which trails the broader benchmark S&P 500 Index significantly.
Archer still carries significant potential, but as I mentioned above also involves a good amount of risk because it's in a new, unproven industry where many questions remain.
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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.