Archer Aviation is positioned in the fast-growing urban air mobility sector, particularly focusing on electric vertical take-off and landing (eVTOL) planes. According to McKinsey’s forecast, the industry is expected to grow at a CAGR of over 50% until 2035.
This substantial market growth suggests that Archer is still in its infancy but has a promising future.
Archer’s unique design and development strategy position it as a potential first-mover in commercial eVTOL operations, indicating strong competitive potential in the industry.
Competitive Landscape and Differentiation
The urban air mobility sector is highly competitive, with several companies vying for market leadership. Regulatory frameworks are evolving, posing significant barriers, including rigorous safety and reliability testing by authorities like the FAA. Despite the industry’s youth, competition is fierce with several major players.
Archer differentiates itself with a 12-motor configuration, which offers superior control redundancy compared to Joby’s six-motor design. This configuration potentially enhances safety, a crucial factor for regulatory approval. Archer’s approach contrasts with the rapid iteration strategy of competitors like Joby.
Instead, Archer adopts a conventional aircraft manufacturing strategy, involving extensive initial concept phases followed by detailed design reviews. This method, used in developing aircraft like the Boeing 787 and Airbus A380, aims to produce a finely-tuned final prototype through fewer iterations.
Progress and Challenges
Archer Aviation has made significant strides in prototyping and certification, showing promise in eVTOL technology and commercialization. However, the company still faces challenges, including rigorous testing, securing FAA certification, and refining production processes.
Archer must demonstrate the reliability, safety, and efficiency of its aircraft to meet regulatory standards and market expectations.
Archer is currently on its second prototype, while competitors like Joby are on their fifth. This difference in strategy highlights Archer’s focus on meticulous planning and design accuracy. The company plans extensive flight tests to build confidence in safety and reliability, crucial for FAA certification.
Additionally, Archer has partnered with Stellantis to enhance its production capabilities for large-scale manufacturing.
Valuation
Based on a valuation analysis using a probability-weighted model, Archer Aviation’s valuation is estimated at $5.89, representing over 60% upside compared to its current price. The model reflects expectations of revenue growth starting in 2025, reaching $284 million by 2026 in an optimistic scenario.
The company plans to ramp up commercial operations by late 2025, with expectations of reducing operating expenses as research costs decline.
The valuation model assigns a 65% probability to a successful scenario and a 35% probability to a less favorable outcome, based on the company’s progress in prototyping, certification, and design.
A 9.5x EV/Revenue multiple for 2026 is applied, which is more realistic compared to current industry ratios like Joby’s 1000x EV/Revenue.
Risk Factors:
Investment Risks Regulatory Risks
The certification process in a novel and disruptive industry is uncertain. Delays or changes in regulatory standards could impact Archer’s commercial plans.
Technology Risks
eVTOL technology must prove its safety, performance, battery life, and cost-efficiency. Issues could arise during design, testing, and other phases.
Competition
Intense global competition means that faster progress by competitors could capture market share, potentially leaving Archer behind.
Conclusion
Archer Aviation’s progress and strategic focus present an optimistic outlook for its future in the eVTOL market. With its unique aircraft design emphasizing safety and a well-planned development strategy, Archer is well-positioned to become a leader in the rapidly growing urban air mobility sector.
Despite uncertainties, Archer’s potential and likelihood of success suggest a promising future in this innovative industry.
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Kris is a finance consultant, content marketer, and speaker specializing in helping brands and business owners navigate complex concepts and decisions. Since earning her Finance and Accounting degree, Kris has spent over half a decade writing about financial and technological concerns of brands spanning different life cycles.
