Could Investing $50,000 in Archer Aviation Make You a Millionaire?
It wasn't too long ago that flying taxis were the stuff of science fiction. The technology needed to economically ferry passengers through the skies above busy urban streets just didn't exist.
As is so often the case though, time and innovation remove the obstacles to compelling ideas. Light but strong materials and quiet battery-electric engines are now realities, making air taxis possible. In fact, Archer Aviation (NYSE: ACHR) is making them. It hasn't commercialized them yet, but that milestone is visible on the horizon.
Could the air taxi market take off well enough to turn a $50,000 investment in this currently beaten-down stock into a $1 million (or greater) position at any point in the foreseeable future?
Archer Aviation builds a long-awaited kind of aircraft
Archer's aircraft are small, multi-passenger commercial aircraft capable of vertical take-offs and landings, but that fly using wings for lift like conventional airplanes once in the air. They truly offer the best of both worlds. Yet they also offer a level of practicality that neither airplanes nor helicopters can deliver by themselves, thanks to their relatively quiet and convenient operation.
See, while helicopters and airplanes are still powered by combustion engines spinning noisy propellers or chopper blades, Archer's primary aircraft -- the Midnight -- has a battery-electric engine and it's 100 times quieter than a helicopter.
This could be game-changing for the urban-mobility business. Commutes that could take one to two hours by car could be completed in 10 to 20 minutes. These aircraft can make numerous such trips per day too, as Archer describes the recharge times for their lithium-ion batteries (the same kind used in electric automobiles) as "minimal." The aircraft are also relatively low maintenance, unlike their more traditional counterparts.
Prototypes of the Midnight have completed more than 400 successful test flights this year already, in preparation for their intended eventual Federal Aviation Administration (FAA) approval. The U.S. Air Force is testing them out as potential additions to its own fleet, recognizing the Midnight's cost-effective practicality. Automaker Stellantis is both an investor and a manufacturing partner. Archer's medium-term plans involve ramping up production of the Midnight to 650 aircraft annually.
Genuine, legitimate interest
Is it possible that the Midnight is a solution to a problem that doesn't exist?
That would have been an easy conclusion to jump to not that long ago. But several organizations appear to believe the eVTOL's potential is real enough. Los Angeles International Airport is working with Archer Aviation to develop several "vertiports" in the Greater Los Angeles area, for instance. Drop-off and pickup sites could include Hollywood Burbank, and SoFi Stadium, where the NFL's Rams play their home games.
Similar plans are being hammered out for San Francisco as well, and other major cities in the U.S. and abroad are on Archer's radar, so to speak.
Perhaps more promising is the fact that potential partners adjacent to the air taxi industry are also expressing interest. Southwest Airlines has inked a memorandum of understanding with Archer to offer short commute flights from California airports where the airline operates.
Meanwhile, even before the eVTOL has earned commercial certification, a company called Future Flight Global has signed a contract to purchase up to 116 Midnight aircraft. That $580 million deal brought Archer's prospective order book up to $6 billion.
The driving force behind all of this growing interest isn't just wishful thinking, either. Several market research outfits expect this convenience-driven market to take off now that the right technology is in place. Mordor Intelligence predicts the global air taxi market will nearly quadruple in size to more than $4 billion per year between now and 2029, for example. That view jibes with a forecast from the IMARC Group.
Lots of upside potential, but lots of all-or-nothing risk, too
This all leads back to the original question: Could investing $50,000 in Archer Aviation today eventually make you a millionaire? It could. But that's an answer that comes with a major asterisk.
The predictable caveats apply to this investment option. Not only is Archer pre-profit, it's also pre-revenue (at least from product sales). While would-be buyers have expressed $6 billion worth of interest, those aren't contractually committed orders. There's no guarantee all of that interest will turn into actual revenue. And even if it does, there's also no guarantee that those sales will translate into profits.
There's also the distinct possibility that the market for air taxi services just won't materialize as expected. Air travel of any kind has its unique risks, and even more so when the skies above urban settings get crowded. The FAA could balk.
Then there's the not-so-small matter of marketability. Remember, for every transformative concept like automobile ride-hailing that did take off, there's another paradigm-shifting business like meal kits that never lived up to expectations. Flying taxis seem like an all-or-nothing, pass/fail sort of opportunity. There's no middle-ground level of demand brewing here.
Given that short-trip air travel around major cities truly would solve a lot of problems for a lot of people, however, the odds are good enough that the premise will take hold. This should in turn spur the predicted demand for Archer's game-changing Midnight aircraft.
Just be careful of betting too much of your portfolio on this aggressive, high-risk play. While plenty of stocks have dished out 20-fold growth in the past, most of their underlying companies were on a firmer financial footing in better-established industries than Archer Aviation is now. (Think Nvidia or Amazon.)
In other words, just because you've got $50,000 worth of idle cash to invest at this time doesn't mean you should put it all into this one idea. There are less risky ways to grow that kind of money into a seven-figure position. They would just take longer than Archer might -- if that kind of growth is indeed in the cards here.
Should you invest $1,000 in Archer Aviation right now?
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Nvidia. The Motley Fool recommends Southwest Airlines and Stellantis. The Motley Fool has a disclosure policy.
