Why BlackRock Just Took an 8.1% Stake in Archer Aviation Stock

Archer Aviation (NYSE: ACHR), a developer of electric vertical take-off and landing (eVTOL) aircraft, hasn't impressed many investors since its public debut in 2021. It missed its ambitious production forecasts and has delivered only a single test aircraft so far.

That's why it was surprising when BlackRock (NYSE: BLK), the world's largest asset manager, recently acquired 8.1% of Archer's outstanding shares. That $366 million stake is a drop in the pond compared to BlackRock's total assets of $14 trillion. Still, investors might wonder why the financial giant would be interested in this little eVTOL maker.

Image source: Archer Aviation.

Archer has plenty of irons in the fire

Archer's Midnight eVTOL carries one pilot and four passengers, travels up to 100 miles on a single charge, and can reach a maximum speed of 150 miles per hour. It expects these aircraft to replace helicopters for short-range flights.

Archer had an "indicative" (non-committal) backlog of $6 billion with pending orders for approximately 1,200 aircraft at the end of 2025. But to fulfill those orders, it must gain the FAA's full approval for its commercial flights and ramp up its production and deliveries. Its top investor, Stellantis (NYSE: STLA), plans to help the company mass-produce those aircraft as its contract manufacturer, but that partnership is advancing more slowly than expected.

Nevertheless, the U.S. Air Force and plenty of 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 Archer's eVTOLs in their short-range flights. If Archer scales up its business and fulfills those orders, analysts expect its revenue to rise from nothing in 2025 to $32 million in 2026.

Yet that could just be the beginning. According to Exactitude Consultancy, the global eVTOL market could expand at a 23.5% CAGR from 2025 to 2034 as the regulators approve more commercial flights and the airlines launch more short-range air taxi routes.

Should you follow BlackRock's lead?

BlackRock likely expects Archer to emerge as one of the early leaders of the eVTOL market. If that happens, it could eventually produce hundreds of aircraft per year and disrupt the helicopter industry. But with a market cap of $4.96 billion, it's already valued at 155 times this year's sales. It also won't break even anytime soon, and it's unclear when the FAA will approve its first flights.

It might be smart to follow BlackRock's lead and allocate a tiny sliver of your portfolio to Archer, but this speculative stock shouldn't be one of your core holdings. It will likely remain volatile this year, and it could sink lower if it grapples with more production issues and delayed approvals.

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