Is Archer Aviation Stock a Buy Now?

Flying cars could soon be more of a reality than science fiction.

Several companies are developing electric vertical take-off and landing (eVTOL) aircraft, including Archer Aviation (NYSE: ACHR), which hopes to ship its first piloted commercial unit later this year. The stock has also lifted off, soaring over 160% over the past 12 months.

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Experts estimate that eVTOLs could become a $17 billion industry over the next decade and will likely grow well beyond that, with use cases spanning government applications and the commercial sector, including alleviating traffic congestion in cities.

But is now the time to buy Archer Aviation stock? Here is what you need to know.

Image source: Getty Images.

Archer Aviation is pursuing eVTOL opportunities at home and abroad

The company is gearing up to monetize its first model, the Midnight aircraft. It's an eVTOL designed for short, rapid flights (20 to 50 miles) and seats four passengers, excluding the pilot. Archer Aviation could soon be off to the races with multiple business opportunities in motion:

Military and defense

Last summer, Archer Aviation delivered its first Midnight aircraft to the United States Air Force for testing to ramp up its AFWERX Agility Prime contract, worth up to $142 million. In December, it announced a partnership with Anduril, a private defense company, in a joint venture to produce a hybrid propulsion aircraft for defense applications.

Non-U.S. commercial

Archer Aviation has a launch program for early commercial customers. It has struck deals for deployments with three non-U.S. companies: Abu Dhabi Aviation (United Arab Emirates), Ethiopian Airlines (Ethiopia), and PT Industri Ketahanan Nasional (Indonesia). Archer plans to ship its first unit to Abu Dhabi Aviation over the coming months, with plans to launch later this year.

U.S. commercial

United Airlines has invested in Archer Aviation and partnered with the company to develop an air taxi network in New York City, utilizing Archer's Midnight aircraft to connect people in Manhattan to the area's airports. Additionally, Archer Aviation became the official air taxi of the 2028 Olympic Games in Los Angeles.

Finally, on June 11, President Donald Trump signed three executive orders, including one to establish an eVTOL Integration Pilot Program. It should help ease regulatory red tape and accelerate the growth of eVTOLs in the United States.

The business is well-funded, but investors will probably need patience and a strong stomach

As promising as that all sounds, it's likely going to be a while before Archer Aviation is generating meaningful business results. Analysts currently anticipate the business generating $12 million in revenue this year, followed by $144 million next year. Its trajectory beyond that will depend on winning and fulfilling contracts, which involves besting competitors, manufacturing aircraft units, and delivering them on time.

The good news is that the company is well-funded to withstand near-term losses. The business burned through $451 million in cash over the past year, but currently has $2 billion in total liquidity following a recent fundraising, and has an additional potential $400 million pending further developments in a planned manufacturing partnership with automaker Stellantis, which has invested in Archer Aviation.

What's the takeaway here? Investors will need to be patient. Archer must still navigate several regulatory and production milestones before living up to its hype, which should weigh on investors' minds when contemplating buying the stock. Until then, Archer remains speculative and will be a volatile stock for some time.

Is the stock a buy now?

The burning question becomes: Is Archer Aviation, valued at $5.9 billion with zero revenue, a good buy right now?

Assuming the company's revenue reaches analyst estimates next year ($144 million), that means the stock is still trading at nearly 41 times next year's sales. Investors should be careful about paying such a high price-to-sales ratio because the business isn't profitable, and therefore, may not warrant such a high valuation.

Sure, the market for eVTOLs is an exciting opportunity, but Archer Aviation faces competition from other emerging players, including Joby Aviation and Lilium, as well as established aviation giants, such as Boeing. It's still unclear which companies will execute and emerge as market leaders.

It's probably wise to approach Archer Aviation -- a promising business, but one with significant risks at this price -- with some caution. The stock has already traded down to near $6 this year and could drop again if the markets become shaky.

Should you invest $1,000 in Archer Aviation right now?

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Justin Pope has no position in any of the stocks mentioned. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.