This eVTOL Stock Could Set Early Investors Up for Life

Confession: I've been wrong about Archer Aviation (NYSE: ACHR). Not totally wrong, but wrong enough to make me rethink the stock. In truth, I've been analyzing the stock too narrow-mindedly, with too much focus on its air taxi business and not enough on the other developments taking shape around it.

Two of those developments are in defense and autonomous technology. And I think they will make Archer one of the most formidable eVTOL businesses on the market.

Archer's latest move could reduce future costs by a quarter

By now, you probably know what Archer is, or what it's trying to build. It's a frontrunner in the nascent electric vertical takeoff and landing (eVTOL) industry. Long term, it wants to operate an air taxi service, a kind of Uber (NYSE: UBER) in the skies, a transportation network to taxi people through the air to vertiports in major cities.

The urban mobility market, which includes eVTOL services, is expected to grow into a multitrillion-dollar market over the next several decades. That has also been one of the primary reasons to invest in companies like Archer, whose $4 billion-ish market cap could grow exponentially if this industry attracts the heavy demand expected of it.

Air taxi services will always be Archer's crown jewel, and the company has shown zero interest in backing away from that market. But since it can't actually operate an air taxi business yet, because FAA-type certification is stilling pending, the need for revenue has led it to make some surprising moves, one of which I'll talk about here.

Image source: Archer Aviation.

That move was its recent decision to take three businesses from Boeing (NYSE: BA) in exchange for 19.75% of Archer's pre-close share count, plus two warrants for $100 million of stock apiece. All three cross into Archer's business in some way: Wisk designs eVTOLs, SkyGrid's software manages air traffic, and Insitu builds drones. But Insitu seems like the real prize right now. Let me put it this way: It is a profitable business that is generating $200 million in annual revenue. And for Archer -- whose second-quarter revenue was about $5 million -- any profit could stop a multimillion-dollar cash-burning hole that has seemed impossible to fill.

Data by YCharts.

Insitu's revenue can help cash flow Archer's business in the short term. But, to return to my prediction, the purchase that could make Archer's business thrive isn't Insitu but Wisk.

Like Archer, Wisk is building eVTOLs. Unlike Archer's eVTOL Midnight, however, Wisk's aircraft is being developed for autonomous -- that is, pilotless -- flight. Obviously, that raises the bar on safety and regulation, which is already high because of the novelty of eVTOLs, but if autonomous technology can be relied upon, it would eliminate one of the most expensive portions of an air taxi flight: paying the pilot.

Indeed, one academic study of eVTOLs, published in 2024, estimated that autonomous operations could cut operating costs by about 27% compared with piloted flights. Granted, that's just an estimate, and Archer's real-world economics could differ significantly, but the point is clear: Pilotless flights could improve Archer's bottom line, perhaps by a significant amount.

Archer, I predict, is aiming for pilotless eVTOL flights, and if it succeeds, it will become one of the most efficient, profitable, and advantaged eVTOL businesses out there. That future, of course, still hinges on FAA certification, but if Archer gets there, today's investors would be getting in before that advantage is recognized.

Steven Porrello has positions in Archer Aviation. The Motley Fool has positions in and recommends Boeing. The Motley Fool recommends Uber Technologies. The Motley Fool has a disclosure policy.