Archer Aviation (ACHR) is attracting interest as it advances the development of electric vertical take-off and landing (eVTOL) aircraft for short-distance transportation. The emerging eVTOL market is projected to reach $24 billion by 2031, attracting competition from companies like Joby Aviation, Lilium, and Airbus.
Since early October, Archer Aviation’s stock has surged nearly 200%, currently trading just under $9 per share with a market capitalization of $3.8 billion. Investors are debating whether the company’s recent progress and financial outlook justify buying the stock before it crosses the $10 threshold.
Key Milestones and Financial Strength
Despite not yet generating revenue, Archer Aviation has made significant progress in its development and commercialization efforts. Over the past six months, the company has:
- Secured a manufacturing partnership with Stellantis to scale production of its Midnight aircraft.
- Delivered a prototype eVTOL to the U.S. Air Force under a $142 million contract.
- Completed its 400th test flight four months ahead of schedule.
- Finished construction of a new production facility in Georgia for mass manufacturing.
- Announced plans for commercial air taxi operations in Abu Dhabi, expected to begin in Q4 2024.
The company’s financial position appears solid, with $1.5 billion in available funds, including $500 million in cash and no long-term debt. Its financial backing provides a cushion as it continues developing and launching its services. Additionally, $6 billion in pre-orders from early customers and investors indicate strong demand for its aircraft.
Future Growth vs. Investment Risks
Archer Aviation’s revenue is expected to reach $261 million in 2025 and grow to $1.1 billion by 2028. Based on these projections, its price-to-sales (P/S) ratio would be 3.4 in 2028, a figure that remains speculative given the uncertainties surrounding profitability.
The company’s success depends on factors such as manufacturing efficiency and competitive pricing, both of which could impact margins. Established aviation companies like Boeing trade at 1.4 times revenue, while Toyota’s P/S ratio is 0.8 in a more competitive automotive industry. While Archer Aviation is expected to grow faster than these mature companies, its valuation remains uncertain due to hypothetical sales and unpredictable profitability.
Is Archer Aviation a Buy Right Now?
Archer Aviation has demonstrated remarkable progress in advancing its eVTOL technology, securing contracts, and preparing for commercial operations. However, at its current valuation, the stock appears expensive relative to the uncertainties surrounding its financial performance.
Throughout the past year, Archer Aviation traded below $5 per share, which offered a lower-risk entry point. With its recent surge in price, investors may find better opportunities if the stock pulls back from its highs. While its long-term potential remains promising, investing now carries significant risks due to reliance on future projections rather than proven profitability.
