Flying taxi start-up Archer Aviation (NYSE: ACHR) picked up a couple of big orders in November and received some bullish sentiment from Wall Street. Add it all up, and Archer shares were up 25.9% for the month, according to data provided by S&P Global Market Intelligence, as investors begin to grasp the total size of the potential market opportunity for Archer.
Archer is winning orders around the globe
Archer is working to commercialize an electric vertical takeoff and landing (eVTOL) aircraft designed to ferry a few passengers on short flights. The company sees a bright future for eVTOLs bypassing crowded urban streets, replacing existing taxi and ground transport services with fast, reliable flights.
The company was active during the Dubai Air Show in November, announcing several deals that show the global potential for their designs. Air Chateau International, a United Arab Emirates transportation company, signed a memorandum of understanding with Archer to acquire up to 100 of the company's Midnight eVTOL aircraft, valued at about $500 million.
Separately, Archer announced an agreement with India's InterGlobe Enterprises to partner toward the loss of an air taxi service in India.
Archer shares also gained momentum thanks to some commentary from Wall Street during the month. Deutsche Bank reiterated its support for Archer and stuck to its $12 price target, nearly double where the shares trade today. And late in the month, Barclays raised its price target to $6.50, from $4.50, saying that the market around eVTOL companies is maturing.
Is Archer Aviation a buy ahead of its flying taxi rollout?
Investors have every reason to be excited about the potential here, but some caution is required. For one, Archer is still in the process of winning Federal Aviation Administration (FAA) approval for its design and is not expecting revenue service until 2025. And Archer is hardly alone in bringing eVTOLs to market.
One rival, Joby Aviation, appears to be on pace if not slightly ahead of Archer in terms of bringing a product to market. And several other start-ups and established aerospace companies are progressing as well.
With each passing month, eVTOLs are looking more like a real product and less like science fiction. Archer appears well on its way toward capturing at least part of this potential new market.
But market success is still years away, and there are a lot of engineering and regulatory hurdles up ahead, meaning Archer shares are best held as a small, speculative part of a diversified portfolio.
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Lou Whiteman has positions in Joby Aviation. The Motley Fool recommends Barclays Plc. The Motley Fool has a disclosure policy.
