Archer Aviation (NYSE: ACHR) has big plans for 2025. The key goal is for the company’s aircraft to carry its first commercial customer. It will be an important turning point for the business, which up until that event will have only been in the testing phase. Is it a good idea to buy Archer Aviation before it reaches this important goal, or should investors wait until after?
What does Archer Aviation do?
Archer Aviation is an upstart aerospace company trying to break into an industry that is capital-intensive, heavily regulated, and highly competitive. The company has achieved a great deal so far, in that it has taken a good idea and developed a factory that is producing aircraft. Sure, 2025 will only see around 10 of the company’s Midnight aircraft built, but that shouldn’t diminish the achievement, since production levels have to start somewhere.
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Image source: Archer Aviation.
What’s interesting about Archer Aviation’s Midnight aircraft is that they are small, vertical lift vehicles meant only to travel short distances. Essentially, they are air taxis. The hope is that Archer Aviation can set up services in and around large cities serving customers that want to fly over street-level congestion.
To that end, Archer Aviation is working toward getting FAA approval of its aircraft. It already has FAA approval to operate an airline and to operate a flight training school. All it needs is the aircraft, since it already has an agreement in place to start an air taxi service in California.
The big news in 2025 isn’t happening in the United States
That’s all great news, showing that Archer Aviation is putting the puzzle pieces together now so it can take off when the FAA approves its Midnight aircraft for operation in the U.S. market. But the United States isn’t likely to be the first market in which Archer Aviation’s aircraft are operating. The first market is likely to be Abu Dhabi.
This is where the company is currently working with a partner to set up an air taxi service. The service is likely to carry its first commercial customers in 2025. When that happens, Archer Aviation will have taken its business from a good idea all the way to a proven concept. Buying the stock today will get you in the door before that happens. There’s a high likelihood that investors will take a more positive view of the stock once its Midnight aircraft is carrying commercial customers.
There’s just one caveat, and it’s a big one. Carrying commercial customers isn’t really the end goal. It will be a big achievement, for sure, but it’s only the start of the commercial test of the air taxi concept. Just because Archer Aviation builds an air taxi doesn’t mean there will be enough customers who want to use it to make the company sustainably profitable. This is why more conservative investors might want to hold off on buying Archer Aviation.
To be fair, holding off may result in missed stock gains if the air taxi concept takes off. But it will save investors sleepless nights and protect against the risk that Archer Aviation is building a product that people don’t really want. If Archer Aviation’s air taxi service gains traction, there will likely be years of growth ahead to benefit from, even if you miss an early share price rally.
Archer Aviation is a high-risk investment
Archer Aviation has an interesting idea that still needs to be proven out in the real world. It has achieved a great deal so far, but there is still a long way to go before the business is sustainably profitable. Buying now, before the first air taxi service using Archer Aviation’s aircraft is launched, is a high-risk move that requires a glass-half-full point of view. Waiting until there is proof of a sustainable business model is a more prudent decision that will be a better choice for most investors.
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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
