Could Archer Aviation Stock Be a 10X Investment?

Investing in a business while it's still in its early growth stages can be risky, but it can also result in significant gains if it turns out to be successful. Companies involved in the development of electric vertical take-off and landing (eVTOL) aircraft are prime examples of that. Flying air taxis represent an intriguing growth opportunity for investors, but regulators in the U.S. haven't approved any just yet.

Archer Aviation (NYSE:ACHR) is an eVTOL company that hopes to be a leader in the industry and has been working to obtain certification for its Midnight aircraft. Its stock has been falling sharply in value this year, and currently it has a market cap of around $3.8 billion. Could buying the stock today position investors for potential 10x returns in the future?

Image source: Getty Images.

If Archer's eVTOL aircraft gets approval, the stock could easily soar

The market has been bearish on Archer's stock this year as there hasn't been any sign that approval for the company's air taxi is forthcoming. And until that changes, the company will continue to incur heavy losses and burn through a lot of cash. Archer does generate revenue, having acquired multiple companies, including Hawthorne Airport in California, which may be a future hub for its air taxis. However, with just $5 million in revenue for the June quarter, that's nowhere near close enough to cover the company's operating expenses, which totaled $284 million.

Earlier this year, the company said it was on track to begin air taxi operations sometime in 2026. However, with nothing seemingly on the horizon, investors appear to be concerned that this may not be the case. As a result, the stock has been in a tailspin. But if that changes and there are signs that certification for the Midnight aircraft is coming, that could instantly light a fire under the stock.

Archer could 10x in value, but it's by no means a guarantee

If Archer's Midnight aircraft commences operations and begins transporting passengers, and significant revenue starts to flow in for Archer, the stock would likely become much more valuable than it is right now. To get to 10x its value, its market cap would climb to around $38 billion, which may not be unreasonable given the potential for eVTOLs to revolutionize travel.

Archer has significant growth opportunities ahead. But with its losses mounting and there being plenty of risk, it's not going to be a suitable option for most investors. However, for those willing to take on the uncertainty, this could be a good growth stock to simply buy and hold.

David Jagielski, CPA 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.