Traffic jams in urban centers always prompt thoughts of the Jetsons and their flying cars whisking them to work. Archer Aviation Inc. (ACHR) has emerged as one of the most intriguing ways to play this theme. The company’s strategy is to be a leader for short-haul transportation in metro areas and for military and defense purposes, writes Carl Delfeld, editor of Cabot Explorer.
Improvements in electric batteries and vertical takeoff technology are bringing this science fiction dream to reality. Morgan Stanley projects that what they call “urban air vertical takeoff and landing” (eVTOL), like an electric helicopter, will be between a $1.5 trillion and $2.9 trillion market by 2040.
ACHR stock has surged, then pulled back, as the company races toward Federal Aviation Administration (FAA) certification. Archer is an aggressive play since it will post no revenue this year. But it has signaled its seriousness, having just bought an airport in Los Angeles that will serve as a flagship for its LA-area air taxi network.
The acquisition of Hawthorne Airport was for $126 million in cash. Hawthorne is about three miles from LAX (Los Angeles International Airport), and the company has been named as the exclusive air taxi provider for the 2028 Summer Olympics. The LA metropolis provides Archer with the right geography and economic base.
The Hawthorne acquisition also provides Archer with a dedicated platform for its AI-powered operations as it co-develops with Palantir Technologies Inc. (PLTR), the U.S. Air Force, and Anduril on defense programs.
Archer's Midnight aircraft is a piloted electric takeoff vehicle that can house four passengers. In a recent test flight, a pilot flew 55 miles and averaged 126 miles per hour, all with a powerful electric motor for takeoff and landing. Instead of one propeller, the vehicle has 12, so if one fails, the aircraft and pilot can continue to fly.
Archer 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. Archer finished the third quarter with $1.65 billion in cash and short-term investments – and raised an additional $650 million, giving it roughly $2.3 billion in cash.
Archer has received more than a billion dollars’ worth of orders for its Midnight aircraft, but it's unclear when those will be fulfilled. The same could be said for this speculative and exciting stock. FAA certification would be an important milestone.
Recommended Action: Buy ACHR.
