Where Will Archer Aviation Be in 3 Years?

Archer Aviation (NYSE: ACHR) may be one of the most disruptive stocks on the market today. Along with Joby Aviation, the company is pioneering a new form of transportation called electric vertical takeoff and landing (eVTOL), similar to an electric helicopter.

The company envisions its primary applications for it as short-haul transportation in metro areas and for military and defense purposes.

It's already formed significant partnerships and made a number of investments to pave the way to commercialization. The company has not yet earned any revenue, but it's expected to do so soon.

As a development-stage, emerging-technology company, there is a wide range of outcomes for Archer Aviation over the next few years. In order to have a better sense of where the company and the stock will be in three years, let's first take a look at where the company is now.

Image source: Archer Aviation.

Where Archer Aviation stands today

Archer Aviation has yet to record any revenue, meaning it hasn't completed any sales of its vehicles. Its flagship vehicle is the Midnight, which has a list price of $5 million, and is designed for 10- to 20-minute air taxi rides to and from the airport or in and around a metro area.

Among its recent moves are the acquisition of Los Angeles' Hawthorne Airport for $126 million in cash. The airport is less than three miles from LAX (Los Angeles International Airport), and the company has been named as the exclusive air taxi provider for the LA 2028 Summer Olympics, which will be a major test for the company in three years. The airport will generate revenue for Archer and is currently profitable on an earnings before interest, taxes, depreciation, and amortization (EBITDA) basis.

Additionally, in the third quarter, the Midnight demonstrated flights over 50 miles and at higher than 10,000 feet in altitude, and Archer acquired a $21 million portfolio of technology assets from Lilium. The company has also began flying Midnight in Abu Dhabi with its partner Abu Dhabi Aviation, and has added new partners like Korean Air.

While those steps all seem promising, the company continues to lose money. It reported total operating expenses of $174.8 million in Q3, up from $122.1 million in the quarter a year ago, and its net loss was $129.9 million, which includes other income from the change in the fair value of a warrant liability and interest income, making it less than operating expenses.

Archer has plenty of liquidity now. It finished the third quarter with $1.65 billion in cash and short-term investments and raised an additional $650 million after the quarter ended to fund the Hawthorne acquisition, giving it roughly $2.3 billion in liquidity.

What 2028 looks like for Archer Aviation

Archer has received billions of dollars worth of orders for its Midnight aircraft, but it's unclear when those will be fulfilled. The company's noncash assets on its balance sheet are minimal. It has no inventory and less than $200 million in property and equipment.

The company missed an earlier goal to generate $42 million in revenue in 2024, and a year ago, analysts expected $40 million in revenue in 2025, which it also looks set to miss. Archer's guidance for the fourth quarter called for an adjusted EBITDA loss of $110 million to $140 million, and made no mention of revenue.

Management is laying the groundwork for an active global business, and it aims to have several of its air taxi networks up and running by 2028, including most importantly in Los Angeles.

Bringing that to fruition in less than three years may not be so easy. The company expects to begin commercial air taxi services by 2026 in the United Arab Emirates, which will be its first major test.

By 2028, Archer is likely to be judged on the implementation of its air taxi network and its other initiatives, rather than on financials. Still, the unit economics of the Midnight, which carries just four passengers, seem poor when it's used as an air taxi, and it's yet to prove itself in operation. The price to make the vehicle will not be affordable for most customers.

There are a lot of risks between now and 2028 for Archer Aviation. While management clearly has its sights set high, it hasn't yet passed the commercialization test or executed in a real-world scenario. There's certainly room for the stock to go higher, but there's a stronger case that the stock is overvalued at a market cap of $5.6 billion.

Even if its commercialization goes according to plan, the company is likely to be burning cash for years to come. Whatever happens, expect the stock to continue to be volatile.

Jeremy Bowman 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.