Archer Aviation Is Cheap Right Now. Here's Whether That Makes It a Buy.

Key Points

Archer Aviation is nearing commercialization.

The company's business model is flexible and could include military and logistics streams of revenue.

Revenue is expected to climb 170,000% over the next two years.

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If you've read my articles on Archer Aviation (NYSE: ACHR) before, then you might be familiar with my speculative introductions: "Picture this," I'll say, "a future of flying taxis, with congested traffic far below your feet, and a clean, quiet ride to your nearest airport conducted in 10 minutes or less."

That may have stimulated the imagination a year ago, but today, the real possibility of these aircrafts flying in a sky near you is making a fanciful introduction less and less unnecessary.

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Indeed, at this point, both Archer and rival Joby Aviation have successfully demonstrated flight tests for their electric vertical takeoff and landing (eVTOL) aircraft, with Joby planning its first Manhattan tests at the end of April. Both companies are nearing the completion of the FAA certification timeline. Soon enough, social media will be flooded with passengers filming their flights over city skylines.

Archer Aviation, however, still trades as if the company were stuck in a phase of ideation. True, it lacks revenue, and commercialization isn't in its back pocket just yet. But trading below $6 -- and down about 30% on the year -- makes Archer a compelling buy for me today. Here's one reason why.

Archer Aviation could fly more than just passengers

Archer's business model will blend elements of a manufacturer (selling eVTOL aircraft) with those of an operator (actually providing the air taxi services) to jump-start its eVTOL ecosystem. But that's only the beginning of what could become a highly diversified business.

One bright spot for Archer is the opportunity for defense and military applications. Indeed, since 2021 Archer has partnered with the Department of Defense (DOD) to build eVTOL technology for government purposes. Think silent reconnaissance, evacuation missions, or even the delivery of aid for humanitarian and disaster relief. The multiple uses of its eVTOL aircraft for defense could easily lead to long-term contracts and consistent cash flow, giving it stability as it scales its business.

Another potential growth opportunity for Archer is in the logistics space. Much like an urban hop could reduce travel time for passengers, flying packages in an eVTOL could cut down shipping time for high-value goods, like medical supplies. The technology might be so successful that companies like Amazon could adapt aircraft to deliver packages between distribution centers.

Is Archer a buy right now?

The scenarios above could turn Archer into an industrial giant with a name as common as Uber. Of course, we shouldn't get too carried away here. Archer is pre-revenue, burning cash, and raising capital with stock dilution. Its growth path will likely be asymmetric, with plenty of near-term turbulence.

That said, Archer could make some huge leaps from here. Indeed, revenue is projected to climb over 170,000% within the next two years, from essentially zero to about half a billion.

The stock is speculative, and execution risks abound. Yet, for a high-risk, high-reward play on the future of urban mobility, Archer's price today is an attractive opening for what could be a big return over the long term.

Should you buy stock in Archer Aviation right now?

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Steven Porrello has positions in Archer Aviation. The Motley Fool has positions in and recommends Amazon and Uber Technologies. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.