Exciting times are ahead as flying taxis inch closer to becoming a reality. Archer Aviation(NYSE: ACHR) is at the forefront of this groundbreaking technology and is gearing up to launch its flying taxis for the first time this year in the United Arab Emirates.
This could be a monumental leap forward as Archer aims to take urban transportation to new heights. Archer Aviation stock is up 89% over the past year. However, recent market volatility has weighed on stocks overall, and Archer Aviation is now 43% below its 52-week high.
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With stock trading at a cheaper price, investors may be tempted to scoop up some shares. Before you do that, there are a few things to consider first.
Air taxis could be up and running as soon as this year
Archer Aviation is one of the leading companies developing electric vertical takeoff and landing aircraft (eVTOL), which could upend urban transportation as we know it. These vehicles, also known as flying taxis, are perfect for urban transportation due to their agility and ability to operate in small spaces. Their electric motors also enable quieter operation with less pollution.
Archer is making solid headway. Last December, it finished constructing its 400,000-square-foot manufacturing facility in Covington, Georgia. Production is slated to begin this year. Archer also intends to launch a commercial air taxi service in the United Arab Emirates (UAE), which would be the first operational air taxi service in the world.
With the help of Abu Dhabi Aviation, Archer plans to launch its air taxi service later this year. The company plans to deploy small fleets of its Midnight aircraft to early adopters, like Abu Dhabi Aviation and the recently signed Ethiopian Airlines, over the next 18 to 24 months as part of its "Launch Edition" commercialization program.
Image source: Archer Aviation.
Archer is making progress on certification in the U.S.
The company is still in the early stages of what could be massive growth in a budding industry. A few years ago, researchers at Morgan Stanley estimated that the total addressable market for urban air mobility could grow to $1 trillion by 2040 and as high as $9 trillion by 2050. However, technology has some serious hurdles to overcome before it becomes a reality.
In February, the Federal Aviation Administration (FAA) also recognized Archer with its Part 141 certificate, formally recognizing it as a regulated institution for pilot training. With the green light from the FAA, Archer can begin training and qualifying pilots for its future fleet of eVTOL aircraft.
This is the third of four certificates the company has been waiting for from the FAA to launch operations. It is awaiting type certification for its Midnight aircraft, which will be the final certification before it can begin commercial operations in the U.S. Archer is hoping to get its type certification sometime this year. However, some have expressed concern that FAA approval could take longer than expected.
JPMorgan analyst Bill Peterson warned investors that commercialization is proving longer than imagined. Peterson says that 2025 is likely off the table, as the rollout in the UAE is proving to be different from what was expected, and that "investors betting on a quick overseas launch may need to adjust their timelines." Peterson has also warned that expectations for total addressable market size have declined from the sky-high projections of three to four years ago.
This is where investors want to keep an eye on Archer's cash burn rate at a time when it still isn't generating any meaningful revenue. The eVTOL company has $1 billion in liquidity. The company posted a net loss of $536 million in 2024, and the burn rate could pick up as it ramps up manufacturing.
The risk Archer Aviation investors face today is the timing of certifications, production, and the rollout of commercial operations. If these take longer than expected, it will be a while before the business starts to generate serious cash flow.
Archer has ample liquidity right now, so its cash needs aren't an immediate concern. However, the cash burn and a potentially longer timeline could weigh on the stock if it needs to continue raising capital as it expands production.
For this reason, investing in Archer Aviation stock isn't for everyone. The company operates in an exciting new industry, and its growth story is still in the early innings. If you buy the stock, treat your investment in Archer as a speculative growth play and only risk a small portion of your portfolio that you are comfortable with on this high-risk, high-reward stock.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Courtney Carlsen has positions in Morgan Stanley. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.
