According to a third-party estimate, the average driver in the United States spends 54 hours per year stuck in traffic. Multiplied by 243 million total drivers, that’s 13 billion cumulative hours lost in traffic each year in the United States. Globally, the number may exceed 100 billion hours. Time, money and quality of life are wasted by sitting in your car stuck on the road.
What if there was a company that could help solve this problem? That is the purpose. Archer Aviation(NYSE: ACHR ) and other electric vertical taxi (eVTOL) companies. With an innovative product and a clear goal (to solve the traffic issue), there is a lot of potential for these new air taxi companies. Does that make Archer Aviation a once-in-a-decade acquisition opportunity in 2025?
The Evitol is a new type of vehicle that is similar to a helicopter but with some major improvements. First, eVTOLs are quieter than helicopters, making them more tolerable in neighborhoods and cities. Second, they are fully electric, using tilt-propeller technology, making them cleaner and more energy efficient.
Archer Aviation is developing an eVTOL to help people travel faster in congested urban areas. For example, he highlights the trip from downtown Manhattan to New York Airport, which can sometimes take more than an hour by car. Once the company’s Evitol point-to-point air taxi network is built, this trip will take less than 10 minutes, he says.
This can be a huge time saver not only for drivers but also for other people on the road. That’s one less car on the road for every person who takes an EVtol trip from Manhattan to Newark. It might cost a pretty penny for this air taxi ride (and the network must be profitable), but I think there will be a lot of demand for the service. Only the very wealthy can afford to skip the usual airport trip via helicopters and private jets.
There are plenty of wealthy people willing to pay hundreds of dollars for an air taxi ride if it means a 10-minute flight to the airport, at least in wealthy cities around the world. This is the passenger segment Archer Aviation is targeting, with plans to open networks in places like Japan, India, the Middle East and the US. According to the management, the first point-to-point network will be operational by the end of this year.
Archer Aviation is not alone in seeing electric air taxis as a modern solution to traffic issues. There are eight other Evitol stocks today, and that’s only counting the publicly listed ones. Fortunately for Archer Aviation, it is one of the biggest and has a lot of funding. It’s also close to bringing the service to market (hopefully in 2025).
Funding for an air taxi startup is huge because of all the capital costs required to build the product, get regulatory approval, and build all the launch sites. In the last 12 months, Archer Aviation has burned through $415 million. Free cash flow. At the end of the third quarter, it had $500 million in cash on the balance sheet and $400 million in commitments. Stellar To help build the manufacturing facility.
We hope these funds will bridge the gap as Archer Aviation works to obtain regulatory approval for its taxi network and build the air taxis it needs. If this gap can be bridged, Archer Aviation has many orders it can fill. The backlog at the end of Q3 2024 stands at around $6 billion, with commitments from airlines and cities around the world. There is clearly a demand for eVTOL solutions. why? Because if they do, there are tangible benefits to society.
Electric air taxis are a promising product. Personally, I hope these companies succeed, and in a big way. That doesn’t mean you should buy Archer Aviation stock. For one, its shares are up 167 percent in the past three months and now have a market capitalization of $4 billion. Today, Archer Aviation is generating zero dollars in revenue and burning hundreds of millions of dollars each year.
Using some estimates from the fixed order book, a typical Archer Aviation air taxi would sell for $5 million. Such manufacturers have low margins, which means that the company takes a lot of orders and operations to reach a positive cash flow. Even at sales of 100 units per year, that’s only $500 million in revenue and generating minimal profit.
With a market value of $4 billion, this seems like a very expensive stock. Avoid adding Archer Aviation shares to your portfolio at these prices, even if you think the underlying Evitol technology has potential.
Before buying stock in Archer Aviation, consider this:
of Motley Fool Stock Advisor A panel of analysts identified what they believed. 10 best stocks Investors should buy now… and Archer Aviation was not one of them. 10 stocks that made the cut could make monster returns in the coming years.
Think about when Nivea Created this list on Apr 15, 2005… If you invest $1,000 during our recommendation, You will have $843,960!*
Stock consultant It provides investors with an easy-to-follow blueprint for success, including guidance on portfolio construction, regular analyst updates, and two new stock picks every month. ofStock consultantIt has a service. More than four times Return of the S&P 500 since 2002*.
