The prospect of air taxis seemed like science fiction a decade ago. Now, they are evolving closer to being a regulated reality with the development of electric vertical take-off and landing (eVTOL) aircraft. Archer Aviation Inc. (NYSE: ACHR) is a leader in developing and commercializing eVTOLs. The stock took an 8% hit on its latest (lack of) earnings report, but shares are already starting to recover.
Archer Aviation operates in the aerospace sector, competing with eVTOL makers like Joby Aviation Inc. (NYSE: JOBY), EHang Holdings Ltd (NASDAQ: EH) and Blade Air Mobility Inc. (NASDAQ: BLDE).
The reality of air taxis is not too farfetched when you look at existing helicopter services like BLADE, which can fly passengers from JFK Airport to Manhattan in as little as 5 minutes. The concept is the same, transporting passengers by air in 10 to 20s minutes, which would take 90 minutes by car through traffic.
Eventually, commuters would take an autonomous eVTOL instead of a helicopter. Archer Aviation is targeting 20-—to 50-mile routes that take over an hour in traffic, with the goal of reducing travel time to minutes using its air taxis. A trip from Manhattan, New York, to Newark EWR Airport in New Jersey takes 62 minutes by train, 52 minutes by car, and 9 minutes by air taxi.
Archer Aviation's flagship product is the Midnight eVTOL aircraft. It's designed to carry 4 passengers and a human pilot traveling at a top speed of 150 miles per hour and a range of 100 miles. It utilizes electric propulsion and all-electric tilt technology, making it more environmentally friendly and much less noisy than a helicopter.
Partnerships and Investments
Archer Aviation has notable partners and investors. Ark Invest fund manager Cathie Wood’s funds own a total of 28.3 million shares or 9.9% of the company after purchasing another 406,912 shares as reported on July 2, 2024.
Stellantis N.V. (NYSE: STLA) has invested nearly $330 million, including a $55 million investment in July under its strategic funding agreement, with proceeds going to fund the construction of its 250,000 square-foot high-volume manufacturing facility in Georgia by the end of 2024. Stellantis would be the contract manufacturer.
On Aug. 8, 2024, Stellantis agreed to fund up to $370 million in manufacturing labor costs to help ensure Archer meets its manufacturing goals of 650 aircraft annually by 2028 and $20 million in capex for the initial ramp of Midnight productions. Archer will issue Stellantis $30 million of performance warrants that will vest based on Stellantis’ achievement of performance milestones under its contract manufacturing relationship
Archer signed a memorandum of understanding (MOU) air taxi agreement with Southwest Airlines Inc. (NYSE: LUV) to develop air taxi networks in California. United Airlines Holdings Inc. (NASDAQ: UAL) is partnered with Archer to operate eVTOL air taxis. It announced a conditional order of $1 billion and $500 million in options.
Archer Aviation delivered its first Midnight aircraft to the U.S. Air Force under its AFWERX Agility Prime contract worth up to $142 million. In July, the U.S. Department of Defense accepted the military airworthiness assessment for Midnight. The aircraft will be used to conduct testing for the U.S. Air Force to validate operational and military-specific mission concepts at Salinas, CA. Facility.
Launch of Air Taxi Networks
On Aug. 8, 2024, Archer announced it plans to launch an air taxi network in Los Angeles that will replace 1 to 2-hour drives with 10 to 20-minute electric flights. Its planned network includes take-off and landing locations at Los Angeles International Airport, the University of Southern California (USC), Hollywood Burbank, Van Nuys and Long Beach. Archer is also coordinating with the Los Angeles Rams and Hollywood Park for a potential exclusive vertiport. It LA network is expected to launch operations in 2026.
On Aug. 13, 2024, Archer signed an MOU with Future Flight Global (FFG) for the purchase of up to 116 Midnight aircraft worth up to $580 million. FFG made an initial deposit. The MOU sets out nearly $5 million in pre-delivery payments to be paid by FFG upon completion of a definitive aircraft purchase agreement. Archer's indicative aircraft order book increases to $6 billion. Order book orders remain conditional and subject to the execution of further definitive agreements with each customer. Order values are based on initial estimates of $5 million per aircraft price.
A Look Ahead
The next crucial step is obtaining certification from the FAA for its Midnight aircraft. This is done by demonstrating its safety, reliability and compliance with all regulations. Archer is working closely with the FAA through the certification process, which is a major catalyst for the stock.
Archer expects to produce an initial rollout of 10 Midnight aircraft in 2025 at its Covington, GA facility, which will be delivered to international customers. By 2026, the goal is to scale up production to 48 aircraft with up to 20% gross margin and up to $48 million gross profit. In 2027, Archer plans to produce 262 aircraft with a 40-50% gross margin, generating $500 to $630 million gross profit. In 2028, Archer plans to produce 650 aircraft, achieving full annual manufacturing facility capacity with greater than 50% gross margin per aircraft, targeting 20% or greater operating margin and generating over $1.6 billion in gross profit.
Financial Performance
Archer Aviation posted $106.9 million in net losses in Q2 2024. Adjusted EBITDA loss was $93.8 million. This is a pre-revenue period, with the increase in adjusted EBITDA due to increased spending to support the Midnight program development and test and manufacturing capabilities. The company closed the quarter with $360.4 million in cash and cash equivalents and $6.7 million in restricted cash. The company expects non-GAAP operating expenses of $90 million to $100 million in Q3 2024.
Analyst Ratings and Price Targets
The daily candlestick chart for ACHR was completed with a cup pattern near the $5.55 cup lip line on July 16, 2024. Shares sold off to a low of $3.46 after its Q2 2024 earnings release. Shares are attempting to bounce and form a handle as the daily relative strength index (RSI) coils back to the 45-band. Pullback support levels are at $3.33, $3.00, $2.69 and $2.40.
Archer Aviation analyst ratings and price targets are at MarketBeat. There are 5 analyst ratings on ACHR stock, comprised of 4 Buys and 1 Hold. Consensus analyst price targets point to a 116% upside at $8.30. There is also a 30.16% short interest.
Is Archer Aviation a Strong Buy?
Investing in quality penny stocks can be a great strategy for those with a higher risk appetite. Over the last few decades, several penny stocks have created massive wealth for long-term shareholders. In fact, multi-trillion-dollar giants like Apple (AAPL) and Amazon (AMZN) were once penny stocks, and are now among the most prominent companies globally.
Archer Aviation (ACHR), valued at $1.17 billion by market cap, designs, develops, and operates electric vertical takeoff and landing aircraft for the urban air mobility market. It is among the few players working on commercializing electric vertical takeoff and landing (eVTOL), providing it with an early mover advantage.
Founded in 2018, shares of the penny stock went public in late 2020 and currently trade about 80% below all-time highs, trailing the broader markets by a wide margin.
Archer Aviation is still pre-revenue, and the company lost $107 million in Q2 of 2024, as it aims to expand manufacturing capabilities while securing all the required regulatory approvals. The company plans to launch its first aircraft next year, and recently announced a slew of partnerships that should boost investor confidence.
Last week, Archer Aviation delivered its first Midnight aircraft to the U.S. Air Force, and inked a contract valued at up to $142 million. Archer Aviation believes the Midnight aircraft will provide a safer, more cost-effective, and quieter alternative to legacy internal combustion engine (ICE) options. Armed with vertical take-off and landing capabilities, the aircraft is ideally suited for military aviation operations.
Automobile giant Stellantis (STLA) is one of the biggest investors in Archer Aviation. Last week, Stellantis announced it would invest up to $400 million in the urban aircraft manufacturer to help scale Archer’s Midnight manufacturing to 650 aircraft annually. The investment will also cover manufacturing labor costs and certain capital expenditures at Archer’s Georgia manufacturing facility through 2030. To date, Stellantis has invested roughly $300 million in Archer Aviation.
Some of Archer’s big-ticket investors include aviation companies such as United Airlines (UAL) and Southwest Airlines (LUV). Since the end of Q2 of 2024, Archer Aviation has secured $230 million in additional equity, shoring up its liquidity position.
Archer Aviation is well positioned to transform urban travel, replacing 60–90-minute commutes by car in traffic with an estimated 10-20 electric air taxi flights.
Out of the seven analysts covering ACHR stock, five recommend “strong buy,” one recommends “moderate buy,” and one recommends “hold.” Interestingly, no analysts are bearish on the small-cap aviation stock.
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