Is Archer Aviation Stock A Buy Now?

In October, the Federal Aviation Administration (FAA) announced final rules for power-lift pilot certification and operations, paving the way for commercializing advanced air mobility, commonly called flying taxis. This regulatory development is the latest news surrounding these flying vehicles, which could potentially transform urban transportation as we know it.

One of the leading companies in this space is Archer Aviation (NYSE: ACHR), which aims to launch commercial operations in the United Arab Emirates within the year. Additionally, Archer is building out another revenue generator as a defense contractor, presenting another lucrative opportunity.

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Archer has benefited from positive news around its industry, contributing to a substantial 82% increase in its stock price over the past year. Read on to see if adding this stock to your portfolio today is right for you.

Flying taxis have made substantial progress with regulators

With modern advancements in battery technology, flying taxis could soon become a reality. Archer Aviation is one of the leading companies working on electric vertical takeoff and landing aircraft (eVTOL).

These vehicles are perfect for urban transportation due to their agility and low noise levels. eVTOL aircraft can take off, land, hover vertically, and operate in small spaces. Their electric motors enable them to operate quieter than helicopters, with less pollution.

Archer Aviation has been developing its aircraft since 2018 and has made substantial progress in making it commercially operational. One key step is getting its Federal Aviation Authority (FAA) Type Certification, which is a stamp of approval that its aircraft meets the required safety and airworthiness standards.

Last year, its flagship Midnight aircraft performed a successful transition flight, soared vertically, then shifted from hover to wing-borne flight before racing forward at speeds of over 100 miles per hour before returning to a smooth vertical landing. The company is about three-quarters of the way toward completing its certification and expects to receive it by late 2025.

In December, Archer finished constructing its 400,000-square-foot aircraft manufacturing facility in Covington, Georgia. The company plans on starting production early this year and expects to ramp production to two aircraft per month by the end of 2025.

Archer announced it had entered into a multiparty collaboration agreement with entities in the United Arab Emirates and Abu Dhabi; it hopes to launch air taxi services in the UAE as early as the fourth quarter of this year.

Strategic partnership with Anduril positions Archer for potential defense contracts

One recent development that has investors bullish is its partnership with Anduril, a defense company specializing in autonomous systems. Anduril aims to sell its products to the Department of Defense. Some of its products include unmanned aerial systems (UAS) and counter UAS and autonomous air vehicles for intelligence, surveillance, reconnaissance, and targeting missions.

In early 2024, Anduril beat out major defense prime contractors Boeing, Lockheed Martin, and Northrop Grumman to advance the U.S. Air Force's Collaborative Combat Aircraft program. Archer will partner with Anduril to develop a hybrid-propulsion VTOL aircraft for next-generation defense applications as part of its new Archer Defense program.

According to analysts at Deutsche Bank, this new program could be multibillions of dollars in nature, "significantly boosting Archer's growth potential." In December, the company raised $430 million through additional equity to support the growth of its Archer Defense program.

Is Archer Aviation right for you?

Archer's defense ambitions and air taxi operations are in their early stages, and the company is pre-revenue and years away from positive cash flow. This makes investing in the stock a higher-risk proposition best left for more aggressive investors looking for growth opportunities.

That said, I like Archer's long-term potential. The company has an order book of $6 billion, and commercial operations could begin as early as this year in the UAE and next year in the U.S. The market potential is massive, too, with Morgan Stanley projecting that the urban air mobility market could reach $1 trillion by 2040.

If you invest in Archer Aviation, it's best to take a measured approach. One prudent strategy is to add some shares today and continue to dollar-cost average into the eVTOL operator as it progresses further with its FAA Type Certification, ramps up aircraft production, and further develops its Archer Defense program.

Should you invest $1,000 in Archer Aviation right now?

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Courtney Carlsen has positions in Morgan Stanley. The Motley Fool recommends Lockheed Martin. The Motley Fool has a disclosure policy.