Why Archer Aviation Stock Could Trounce The S&p 500 In 2025

The electric vertical takeoff and landing (eVTOL) industry represents the next frontier in aviation, with JPMorgan analysts projecting a $1 trillion market opportunity by 2040. Among the companies vying to capture this massive potential, Archer Aviation (NYSE: ACHR), valued at $3.88 billion, stands out through two transformative developments that reshape its growth trajectory. Namely, the company has forged an exclusive partnership with defense technology innovator Anduril while completing a strategic $430 million capital raise that solidifies its top-tier position within the industry.

The convergence of commercial air mobility and defense applications creates a unique investment opportunity in the aerospace sector. Archer now commands dual revenue streams across the urban air mobility market and the defense sector, backed by partnerships with industry titans like United Airlines and Stellantis. Let's examine why this eVTOL pioneer could dominate the skies in 2025 and beyond.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. See the 10 stocks »

Military market breakthrough

The Anduril collaboration marks Archer's strategic entry into the lucrative defense sector through its new Archer Defense program. This partnership combines Archer's proven eVTOL expertise with Anduril's cutting-edge artificial intelligence (AI) and defense-integration capabilities.

The Department of Defense's growing interest in hybrid-electric aircraft platforms makes this alliance particularly timely. The military market offers Archer a clear path to scale beyond commercial operations. The new Archer Defense unit is led by former Sikorsky executive Joseph Pantalone, who brings deep aerospace expertise to guide this expansion.

Strategic capital deployment

Archer's recent $430 million capital raise represents more than just another funding round in the eVTOL space. In an industry littered with underfunded start-ups and ambitious prototypes, strong capitalization separates serious contenders from speculative ventures. After all, the eVTOL landscape is home to hundreds of potential competitors, but few possess the financial firepower to bridge the gap from development to commercialization.

The key takeaway is that this latest capital injection elevates Archer into an elite tier of players capable of executing on both commercial and military fronts, while many rivals face the prospect of running out of runway before achieving meaningful milestones.

Furthermore, the breadth of financial, logistical, and operational support is particularly compelling. United Airlines brings aviation expertise and commercial validation, Stellantis offers manufacturing expertise and scale, while Wellington Management and 2PointZero provide institutional backing and international market access -- creating a powerful foundation for Archer's global ambitions.

Regulatory trailblazing

While this newly minted defense partnership commands attention, Archer's progress on the regulatory front deserves equal consideration. The company has secured a groundbreaking agreement in Abu Dhabi that brings together the UAE General Civil Aviation Authority, Abu Dhabi Airports, and Etihad Aviation Training to establish core operating frameworks.

This multiparty agreement tackles one of the biggest hurdles in the eVTOL industry --regulatory approval for commercial operations. By working directly with aviation authorities, infrastructure providers, and training organizations in the UAE, Archer is demonstrating its ability to navigate complex regulatory landscapes. This experience could prove invaluable as the company seeks operational approvals in other key markets.

Compelling valuation dynamics

The market has started recognizing Archer's strengthened financial and operational positions, reflected in the stock's 185% surge over the past 90 days (as of Dec. 16, 2024). Yet the company's current market cap of $3.88 billion might still significantly undervalue its dual-market potential and robust strategic backing.

The Anduril partnership could prove especially valuable, opening doors to higher-margin military contracts with long development timelines. Defense programs typically offer more predictable cash flow and stronger pricing power than commercial operations, creating an attractive balance that should appeal to long-term investors.

This eVTOL stock is poised to outperform in 2025

While hundreds of eVTOL companies chase urban air mobility dreams, Archer's strategic preparation points to a breakout year ahead. The combination of Anduril's defense expertise, regulatory momentum, and deep-pocketed partnerships creates a powerful lineup of near-term catalysts.

Despite Archer's 185% share-price appreciation over the past three months, the company's current $3.88 billion market cap may still significantly undervalue its expanding market opportunity. After all, this top eVTOL stock looks well-positioned to deliver excess returns, relative to the benchmark S&P 500 in 2025, given its steady march to the market and emerging position in the high-value defense sector.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $342,278!*
• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $47,543!*
• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $496,731!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

See 3 “Double Down” stocks »

*Stock Advisor returns as of December 16, 2024

JPMorgan Chase is an advertising partner of Motley Fool Money. George Budwell has positions in Archer Aviation and JPMorgan Chase. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.