Archer Aviation (ACHR), which plans to operate electric vertical take-off and landing (eVTOL) aircraft in the not-too-distant future, appears to be making a great deal of progress when it comes to developing a commercial business. The company looks poised to launch air-taxi services either this year or in 2026.
The firm also has a significant foothold with the U.S. Air Force and could eventually sell a high number of its eVTOLs to the Pentagon and the militaries of America’s allies.
In light of these points, the stock’s current market capitalization of $4.7 billion looks rather low, and long-term growth investors should consider buying the shares.
Archer’s Tremendous Progress
On April 17, Archer announced that it was teaming up with United Airlines (UAL) to launch an air-taxi service in New York City. According to Archer, its eVTOLs, which can carry four passengers, can travel from Manhattan to the area’s airports in 15 minutes.
Last May, it took me about 45 minutes to travel in a regular taxi (in the early afternoon hours of a weekday) from the northern section of the New York City borough of Queens to JFK Airport, which is located about 12 miles away, on the southern edge of the borough. So air taxis would save travellers a great deal of time and some aggravation.
Archer, which is close to getting final approval from the FAA, intends to launch the air-taxi service in New York City next year. But it says it could kick off its commercial business in Abu Dhabi in 2025.
The company is also working on developing air-taxi services in Los Angeles, San Francisco, and Miami.
Also importantly, Archer’s eVTOL rides are not expected to be very expensive. According to Archer’s estimate, they will cost $6 per passenger per mile, versus $11 per passenger per mile for helicopters.
Archer estimates that its eVTOLs will cost about $1 million each to manufacture, compared with the $2.5 million to $3 million retail price tag for light helicopters. Plus, electricity is much cheaper than helicopters’ fuel.
Finally, after attending a conference featuring Archer and two of its competitors, investment bank Needham reported that regional airports seem interested in partnering with the eVTOL makers. Consequently, providing rides to regional airports can create another revenue stream for ACHR.
ACHR Can Sell Many eVTOLs to Militaries
The U.S. Air Force has already signed a contract worth up to $142 million with Archer, and last August the company delivered an aircraft to the Air Force to evaluate.
Since eVTOLs have many of the same capabilities as helicopters and cost much less, it makes sense for the budget-conscious Pentagon to eventually replace many of its helicopters with eVTOLs. According to one source, the U.S. military owns 5,500 helicopters.
If Archer can sell the Pentagon 2,000 helicopters for $1.5 million each, it will have generated revenue of $3 billion. And of course, many other militaries may very well also want to replace some of their own helicopters with Archer’s eVTOLs.
Add in some high-margin service and maintenance revenue over the longer term, and it’s easy to see how the company can become profitable just from its military business.
The Bottom Line on ACHR
Many consumers and a significant number of militaries will probably be interested in using Archer’s eVTOLs. As a result, the company looks poised to generate significant profits over the long term.
