Is Archer Aviation a Buy in 2026?

If you want the potential for life-changing returns in the stock market, look no further than growth stocks. These are shares in companies that promise to grow their revenue or earnings faster than average, typically by pioneering brand-new industries or disrupting old ones.

Archer Aviation (NYSE: ACHR) is a quintessential example of a growth stock as it builds its business model around electric vertical takeoff and landing vehicles (eVTOLs). They're a new type of electric helicopter that aims to replace ground-based taxis on high-traffic routes like between airports and city centers.

Analysts at JP Morgan believe the opportunity could be worth $1 trillion by 2040. But early movers will have to navigate a maze of government regulation, operating losses, and rising competition. Let's dig deeper to see how the story could play out for Archer Aviation in 2026 and beyond.

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Archer Aviation's edge

Despite being a brand-new industry, the eVTOL space is already quite competitive, with at least 250 companies tackling the opportunity in the U.S., according to data from the Institute of Electrical and Electronics Engineers. There could be dozens to hundreds more eVTOL companies in China, which will likely be able to offer lower prices than U.S.-made counterparts because of the Asian nation's low manufacturing costs.

U.S.-based companies like Archer Aviation are somewhat shielded from the Chinese threat by regulation. Even if a Chinese company can create a competitive eVTOL, Archer is much further ahead in getting the necessary permissions from the Federal Aviation Administration (FAA). It may also enjoy preferential treatment from the Trump administration, which has announced executive orders to accelerate adoption of the technology.

That said, Archer Aviation's deepest economic moat may come from its business model. Instead of simply being just another original equipment manufacturer (OEM) in a sea of competition, it has pursued a vertical integration strategy where it plans to manufacture and sell its Midnight eVTOL to other companies while also running its own air taxi service. This model could expand its revenue opportunities while also unlocking economies of scale advantages compared to rival OEMs.

What could happen in 2026?

As of third-quarter earnings, Archer Aviation is still in its pre-revenue phase. And that means all the money it spends on things like office salaries and research eats away at its cash position. The company's operating loss rose by around 43% year over year to $174.8 million. But with roughly $1.64 billion in cash and short-term investments on its balance sheet, it can likely sustain such losses for a few years without needing to turn to debt or new dilutive stock issuance to raise money.

To be fair, it's normal for growth-oriented companies to generate huge losses as they attempt to scale up their business models. But for a publicly traded company to not generate revenue at all is a rare and unappealing situation for investors because it makes it difficult to map out a pathway for future success. The good news is that Archer Aviation's management team thinks they can quickly change the situation.

CEO Adam Goldstein claims that the company could start seeing revenue as soon as the first quarter of 2026, likely involving sales of its flagship Midnight EVTOL, each of which has an estimated selling price of $5 million. Goldstein also believes Archer will be able to offer full commercial flights by 2028, pending necessary regulatory milestones.

Is the stock a buy?

Archer Aviation's vertically integrated business strategy and the favorable regulatory environment could help set it up for success in the competitive eVTOL opportunity. And the potential for early commercial sales this year could be a significant catalyst for the company's stock price.

That said, investors should always tread carefully with companies that require regulatory approvals for their business model to work. Progress is ultimately outside management's control, and all timelines and projections should be taken with a healthy dose of skepticism. It makes more sense to wait to see actual results before considering a position in the stock.

Will Ebiefung 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.