Stock Market

Archer Aviation (NASDAQ:ACHR) stock got a boost this week. The company became the unquestioned leader in the electric vertical take-off and landing business this last week. That’s thanks to a $142 million contract from the U.S. Air Force.

The contract is for six of its “Midnight” craft. The deal comes with training, repair, and data service revenue. Midnight, first assembled in May, carries four passengers, plus a pilot, and has a range of 100 miles.

Archer shares jumped 29% on the news and are up 200% in 2023.

A Closer Look at ACHR Stock

Electric vTOLs fly forward like airplanes but take off vertically, like helicopters. They have been under development for years, promising fast service between the homes of the wealthy and major airports.

Archer is one of several vTOL companies vying in civilian and military markets. Joby Aviation (NASDAQ:JOBY) recently signed a $200 million deal to develop air taxis for Delta Airlines (NYSE:DAL).

American Airlines (NASDAQ:AAL) and United Airlines (NASDAQ:UAL) have also invested in the space.

Boeing (NYSE:BA) owns an air taxi company called Wisk, for which it paid $450 million in 2022.

Wisk sued Archer for patent infringement and theft of trade secrets in 2021. A judge recently knocked down some claims but set the suit for trial.

This is a global competition. There are Chinese players, like Ehang (NASDAQ:EH), whose craft is more helicopter-like with four rotors at the corners. There’s also a German player, Lilium, which raised $150 million from investors this year.

Interest in vTOLs increased after the Federal Aviation Administration outlined plans for regulating a competitive market in July. Commercial flights are now expected in 2025, with service expected to be routine by 2028.

Archer appears to be in the lead, not only thanks to the Air Force, but agreements to sell several hundred units and build a factory in Georgia.

The FAA statement is the first step toward approving regular commercial service.

Archer has been working with the Air Force since 2021. Its craft are seen as an alternative to helicopters. The Air Force hopes they will also be more cost-effective to transport, operate and maintain.

What Comes Next?

ACHR stock went public in 2021 after it landed a $1 billion deal with United that let it go into production. United and Archer announced an air taxi service out of Chicago O’Hare in February.

Archer now has a market cap of $1.42 billion. Analysts believe the Air Force contract gives ACHR stock a leg-up, thanks to a steady stream of revenue that will also help fund its development. The deal is contingent, however, on Archer delivering the Midnight with the promised specifications.

The Bottom Line

These are still early days in the electric vTOL market. A single accident, or failure to gain certification, could cripple any company.

By the end of the decade, this will be a real business, but between here and there will be many twists and turns. ACHR stock remains speculative, albeit the best one I have seen.

As of this writing, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

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