Archer Aviation: A Once-in-a-Decade Opportunity in 2025?

Archer Aviation (ACHR), a leading developer of electric vertical takeoff and landing (eVTOL) aircraft, has garnered significant attention in the investment community as a potential once-in-a-decade buying opportunity in 2025. With its innovative product and clear goal of helping solve traffic issues, Archer Aviation is poised to disrupt urban transportation and capture a significant market share. However, investors must carefully evaluate the company's financial performance, valuation, and market potential before making an investment decision.



Archer Aviation's eVTOL services have substantial market potential and demand, driven by the need to reduce traffic congestion and improve mobility. According to a report by McKinsey, the urban air mobility market is projected to reach $9 billion by 2030 and $45 billion by 2040. Additionally, the average driver in the United States spends 54 hours a year stuck in traffic, which multiplies to 13 billion cumulative hours spent in traffic every year in the United States. Globally, the figure is likely over 100 billion hours. These statistics highlight the demand for innovative solutions to reduce traffic congestion and improve mobility, positioning Archer Aviation well for long-term growth.

Archer Aviation's eVTOL services target the wealthiest passengers who are willing to pay hundreds of dollars for an air taxi trip if it means a 10-minute flight to the airport. This segment has the ability to skip the typical airport trip with helicopters and private jets, indicating a strong demand for Archer's eVTOL services. The company has a backlog of around $6 billion in orders at the end of Q3 2024, with commitments from airlines and cities around the world. This demonstrates the tangible demand for eVTOL solutions and Archer's potential to fill these orders and generate revenue.

However, investors must also consider Archer Aviation's financial performance and valuation. The company is not yet generating revenue, with a Price-to-Sales (P/S) ratio of -6.66x. Its Enterprise Value (EV) to Revenue ratio is 6,384x, indicating that the company has a high valuation relative to its expected revenue. Additionally, Archer Aviation's EV to EBITDA ratio is -8.52x, indicating that the company is not yet generating EBITDA. These metrics suggest that Archer Aviation is still in the early stages of development and has not yet started generating revenue or EBITDA.



Despite these challenges, Archer Aviation's long-term growth prospects appear promising. The company has secured significant financial backing, including a $400 million commitment from Stellantis to help build its manufacturing facility. This financial support will help Archer Aviation bridge the gap as it works to obtain regulatory approval and build its air taxi network. Additionally, Archer Aviation has established partnerships with various organizations, such as the Abu Dhabi Investment Office (ADIO), Mubadala, and Falcon Aviation, which provide financial support, regional connections, and after-sales service network. These partnerships can help Archer navigate regulatory challenges and accelerate its growth.

In conclusion, Archer Aviation's eVTOL services have substantial market potential and demand, driven by the need to reduce traffic congestion and improve mobility. However, investors must carefully evaluate the company's financial performance and valuation before making an investment decision. While Archer Aviation is still in the early stages of development and has not yet started generating revenue or EBITDA, its strong financial backing and strategic partnerships position it well for long-term growth. As the company progresses and begins to generate revenue, its financial performance and valuation metrics are expected to improve and better align with its competitors.