Should You Invest $500 in Archer Aviation Right Now?​

Like its next-gen electric aircraft, Archer Aviation (NYSE: ACHR) has had its ups and downs lately. The shares may be trading flat with where they were a year ago -- down a mere 1% over the past year -- but different starting lines have different fates.

Archer Aviation stock is trading 62% higher since bottoming out in the spring of last year. However, after going on to almost triple from that low point, Archer shares have fallen 39% since those October highs. Is this a good time to buy Archer with the next $500 you have to put to work in the market, or is this a flight that investors should pass on?

Image source: Getty Images.

Sizing up the blue skies

The bullish argument for Archer is pretty straightforward. It's part of the nascent market for electric vertical takeoff and landing (eVTOL) aircraft. Picture a supersized drone that can carry an actual pilot along with as many as four passengers and some luggage. Archer's Midnight aircraft features a dozen propellers. There are limitations to how far they can go on a single charge. True to the V in eVTOL, the ability to take off and land vertically -- like a drone or a helicopter -- gives it the flexibility to complete a flight with limited clearing space.

Midnight aircraft have recently completed successful test flights, reaching altitudes as high as 10,000 feet and traveling as far as 55 miles at 150 miles per hour. The goal is to cover at least 100 miles. This may seem awfully limited, but the commercial application would be an air taxi service that transports passengers from an airport to a densely populated city, turning a long drive into a short flight. (It won't be cheap, but will be an option for the ultra-affluent.) There are also applications for military and medical transport.

Getting ready to take off

Like its aircraft on a pad, Archer's revenue is about to take off -- and it's going to move pretty fast when it does. Archer has already secured deals with several major airlines worldwide, as well as the U.S. Air Force. It may not be generating revenue now, but it has a clear flight plan to move quickly over the next few years, serving urban mobility and military operations. Here is the consensus of revenue targets by Wall Street analysts:

• 2026: $32 million
• 2027: $305 million
• 2028: $967 million
• 2029: $1,753 million

Archer has a hefty $6.5 billion market cap, but that is less than 4 times its projected 2029 revenue. With its cash-flush balance sheet, the multiple drops to 2.8 on the basis of enterprise value. Rival Joby Aviation (NYSE: JOBY) has more than double the market cap, but analysts see only $1.1 billion in annual revenue there by 2029. They also expect Archer to be the first to turn profitable, hitting that milestone on an adjusted basis by 2029.

Archer seems like a better bet for your next $500 than Joby at this point, but is it even a bet worth placing? The risks are clearly there for an emerging industry. You probably have time to think things over, but you may want make a call within the next two years. Archer has a deal to be the official air taxi provider for the 2028 Olympic Games in Los Angeles, and it's even bought a small regional airport near the city.

Rick Munarriz 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.