Overlooked defense play? Investors bullish on ACHR stock ahead of air taxi launch and military contracts
Archer Aviation (ACHR stock) surged after a $300 million BlackRock-backed funding round and government approval for its air taxi flights in multiple U.S. and international cities.
The Santa Clara, Calif.-based startup, which is building eVTOLs (electric vertical takeoff and landing vehicles), soared 14% last week after receiving certification from the Federal Aviation Administration (FAA) to launch its air taxi pilot training program.
The latest certification is the third of four FAA approvals ACHR stock needs to launch its commercial air taxi service with its Midnight aircraft. With its latest fundraising round, Archer said it now has about $1 billion in cash.
Commercial air taxi with military potential
Archer aims to launch its commercial air taxi service in the United Arab Emirates later this year before expanding to Los Angeles, San Francisco, New York, and unspecified cities in South Korea and India.
The company says its Midnight aircraft, which can hold up to four passengers and their carry-on luggage, will cut a 60–90-minute car ride down to a 10–20-minute flight, covering 20–50 miles.
In addition to its commercial eVTOL, Archer is making a strong push into the defense sector, raising $430 million in December for its newly formed Archer Defense program.
In its fundraising announcement, the company said it had entered an exclusive partnership with weapons manufacturer Anduril to jointly build a hybrid gas-electric VTOL aircraft for military applications.
Investors have been mostly bullish on Archer Aviation, with ACHR up over 100% in the past 12 months and trading near the high end of its 52-week range.
Raymond James raised its price target for ACHR from $11 to $12 on Friday, while Deutsche Bank bumped it from $11 to $15. The stock started the week down, trading at $8.34 on Monday.
Analysts point to “logistical challenges” ahead
Although regulators have approved air taxis, both Archer and Joby Aviation—its primary competitor in the eVTOL startup space—face a challenge that could slow commercial adoption.
As The Motley Fool’s Jeremy Bowman notes, scaling remains a "logistical challenge" that investors may be overlooking or ignoring.
“These vehicles need places in high-density city centers to take off and land, known as vertiports, and those vertiports won’t be easy to obtain,” Bowman explains.
He adds that while eVTOL manufacturers like Archer and Joby tout air taxis' speed advantage over ride-sharing options like Uber and Lyft, it’s “going to be difficult to match the convenience of a conventional ride-sharing service without a massive network of vertiports.”
In other words, if passengers have to take a long taxi ride just to reach an air taxi, it undercuts the speed advantage of an eVTOL.
However, any challenges Archer faces in scaling its commercial business over the coming years could be offset by its growth in the defense sector.