Archer Aviation, Inc. (NYSE:ACHR) is suddenly close to aircraft certification and the launch of an air taxi service. The company came public with a long, tedious FAA certification process ahead and the market has completely missed that Archer is already in production mode with large-scale production around the corner. My investment thesis remains ultra-Bullish on the business prospects of the future air taxi service just around the corner.
2025 Launch
As with a lot of the pre-revenue SPAC companies, the market has lost interest in the investment story just as the businesses are on the verge of launch. Venture capitalists would probably assign a large valuation to a company about to obtain certification for a new aircraft while launching a monumental air taxi service.
The stock surged a couple of weeks ago, with Archer Aviation outlining the detailed plans for the San Francisco Air Mobility Network. The company has five locations planned, along with a hub location in the Oyster Point development in the South San Francisco area.
The air taxi service is quickly going from a promising concept to reality in the next year. The company is planning flights to Napa, San Jose, Oakland and Livermore to connect all five locations
Archer Aviation has recently announced plans for networks in the Abu Dhabi (including multi-hundred millions in incentives) and South Korea with local partners. The key to this launch is the detailed plans for the San Francisco area, where 60 to 90-minute trips due to the limited bridge locations in the Bay Area are replaced with 10+ minute flights.
The company has already obtained FAA certification to operate a commercial airline named Archer Air. The company has the ability to operate other commercially certified aircraft prior to the certification of the Midnight eVTOL aircraft in development, allowing for Archer Aviation to build out systems.
Big Investment
Archer Aviation just announced another $55 million investment from Stellantis (STLA) in another sign the eVTOL company has the funding sources to reach manufacturing of the Midnight aircraft and launch an air taxi service. Stellantis is a $75 billion auto manufacturer, and the company is aggressively investing in the eVTOL company at every turn.
The latest investment was part of the strategic funding partnership established back in 2023 with the investment triggered by Archer Aviation achieving the transition test milestone. Stellantis acquired 17.4 million shares at only $3.14 per share.
Stellantis is so invested into the future of Archer Aviation that the company bought 8.3 million shares in the open market in March at an average price above the current price. The auto manufacturer now owns 56.7 million shares of Archer Aviation and is heavily invested in working with the eVTOL company to reach production at the high-volume manufacturing facility in Georgia towards the end of this year.
Archer Aviation ended Q1 with a cash balance of $406 million, so the $55 million investment is very helpful. The company has quarterly operating expenses forecasted in the $80 to $95 million range, so an additional investment from Stellantis provides the market with more security the company will easily obtain the cash necessary to reach the launch of an air taxi service in 2025.
My previous research highlighted the financials of the business, with United Airlines (UAL) planning to spend $1.5 billion on aircraft. In addition, Archer Aviation has plans to generate at least $2.4 million in annual revenues from each aircraft operated in an air taxi service like the one planned in San Francisco.
A lot of questions exist on FAA certification and the timing of the air taxi service launch leading to material revenues. The stock only has a market cap of $1.2 billion, while the production facility in Georgia could produce up to 650 aircraft annually utilized in an air taxi service alone would produce over $1.5 billion in annual revenues.
Archer Aviation will naturally sell some of the aircraft to partners like United Airlines to generate more upfront revenues. Investors should continue investing alongside major investors such as Stellantis, with the market cap at only a fraction of the billions in annual revenues forecasted from a fully launched air taxi service.
Takeaway
The key investor takeaway is that Archer Aviation is quickly approaching certification of their Midnight eVTOL and the launch of an air taxi service in multiple locations around the globe. Investors should use the current stock price as an opportunity to buy shares below where Stellantis bought shares in the open market in March.
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