Archer Aviation Stock: A Millionaire Maker in the Making?

Source The Motley Fool

Are you willing to accept above-average risk for a shot at an above-average reward? Maybe you're even hoping to turn a modest amount of money into a seven-figure stash in a relatively short period of time.

Well, these kinds of trades are out there. Many of them don't pan out as hoped, to be sure. Every now and then, though, one of them ends up defying the odds. The trick is simply being able to distinguish between mere hype and a product that will actually prove marketable to the masses.

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A start-up called Archer Aviation (NYSE: ACHR) looks like it could become one of these rare success stories...if you can stomach the risk, of course.

But first things first.

What's Archer Aviation?

Most investors probably haven't heard of it. And most of those few who have probably weren't introduced to the company as an investment prospect. More likely than not, they learned about Archer simply because what it's aiming to do is so outrageous, yet now so plausible.

Archer Aviation has developed an electric-powered aircraft small and maneuverable enough to serve as a true air taxi, ferrying passengers to and from different landing points within busy cities that are otherwise congested by automobile traffic. Trips that could take an hour or more will now take only a few minutes.

The aircraft in question is called the Midnight. It's capable of ferrying four passengers by using six battery packs to spin 12 different electric motors, which can be angled in a way that allows for conventional forward flight (like an airplane) or vertical flight (like a helicopter).

This versatility is, of course, what makes it useful as a true air taxi.

And it's not just a theoretical idea. Archer's built it. It's built a handful of them, actually, with the design and its use being partially certified by the Federal Aviation Administration. What's left is the logistical stuff, like a minimum number of test-flight hours and a certification of its mass-production facility. That's mostly its 400,000-square-foot factory in Covington, Georgia, that was completed just last month.

Once up and running at full speed by 2030, Archer intends to make 650 of its Midnight aircraft every year.

Rising tide

It sounds crazy at first. Flying taxis were once only an idea suggested by science fiction. Science has a funny way of eventually catching up with the fantasy, though.

A bunch of other players seem to think so anyway. And they're putting their money where their mouth is.

For instance, in December, a consortium of different organizations in and around Abu Dhabi solidified plans to offer air taxi services in this market. In November, Japan Airlines announced a similar partnership, committing to purchase up to $500 million worth of Archer's vertical take-off/landing aircraft to support the endeavor. Southwest Airlines, automobile maker Stellantis, and South Korea's KakaoMobility are also showing interest in Archer's technology...with dollars.

Connect the dots. That's a sizable swath of in-the-know industrialists all making the same basis bet. That is, that air taxis are a viable business opportunity.

To this end, Mordor Intelligence believes the worldwide air taxi market is poised to grow at an annualized pace of 23% between this year and 2030, despite it being practically nonexistent yet. Precedence Research puts the figure closer to 29%, en route to being a $60 billion annual business by 2034.

A potentially pivotal couple of years

That's a lot of growth from nearly nothing right now and even less from the sorts of electrically powered vertical take-off and landing aircraft Archer's developed. Much can happen between now and their first commercial flights. It's not the sort of backdrop that favors shares of an industry's highest-profile name.

Don't underestimate just how close Archer Aviation is to at-scale commercialization, though, and how much more demand could come out of the woodwork after just a few successful flights.

The first of these flights will likely take place in the aforementioned Abu Dhabi, possibly before the end of this year. The company's also mapped out locations for five landing and takeoff locations in and around San Franciso, however, with the Kilroy Oyster Point site also beginning flight operations possibly before the end of 2025. Los Angeles isn't far behind.

Of course, once the concept is proven, don't be surprised to see a surge in demand for these aircraft that can cut an hour's drive into a 10-minute hop.

Just understand the risk

As was noted, although Archer Aviation's Midnight aircraft is partially approved by the FAA, there are still a few more steps to go before it's fully approved for actual commercial use. And while several companies interested in using its tech to ferry passengers have made financial commitments to purchase them, Archer still needs to manufacture them. That takes time. Much can change between now and then, including the advent of new competitors or struggles to secure the proper permitting.

It's also possible the premise just ends up not being nearly as marketable as expected.

In the same way Amazon made sense as a business back in the early days of the internet, though -- and in the same sense smartphones were the inevitable evolution of simpler mobile phones -- air taxis make sense. They're a solution to a problem that does indeed exist. Should they take off (literally as well as figuratively), Archer Aviation shares could soar as a result. If you buy enough of a stake now, in fact, they could even make you a millionaire.

Just keep this high-risk stock on a short leash, without investing more than you can afford to lose. It's something of an all-or-nothing kind of bet.

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

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool recommends Southwest Airlines and Stellantis. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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