Archer Aviation: Swelling Order Backlog In A Big Addressable Market

Industry Overview - The eVTOL (flying car) industry is in its early stages, with companies focusing on achieving aviation certification for commercialization [1] - The industry is projected to be worth $1 trillion by 2040 and $9 trillion by 2050, accounting for 6% of global GDP [2] - The US eVTOL market is expected to grow at a CAGR of 53% from 2024 to 2030, reaching $920.5 million by 2030 [2] Archer Aviation's Position - Archer Aviation is identified as a potential value creator in the eVTOL space, with a "Strong Buy" rating at $3.8 per share [1] - The company's stock has corrected by 41% in the last 12 months, presenting an accumulation opportunity [1] - Archer is well-positioned as an early mover in the industry, with significant potential for growth and value creation [2] Business Progress and Certification - Archer is progressing towards FAA certification, with commercialization expected in the second half of 2025 [4] - The company has achieved key milestones, including final airworthiness criteria for its Midnight flight and Part 135 Air Carrier & Operator Certificate from the FAA [4] - Archer has also received a Part 145 certificate, allowing it to perform specialized aircraft repair services [4] Order Book and Revenue Potential - Archer has an indicative order book of $6 billion for the delivery of 1,141 aircraft [6][7] - The order backlog is primarily from the US, India, UAE, and Korea, with 89.8% of orders from these regions [8] - The company plans to deliver 10 eVTOLs in 2025 and 48 in 2026, with revenue expected to remain below $500 million in 2026 [9] - By 2028, Archer targets revenue of over $3 billion with a potential operating margin of 20% [9] Strategic Partnerships - Archer is backed by strong partners, including Stellantis, which has invested $300 million and signed a $400 million contract manufacturing agreement [10] - The company has partnerships with United Airlines and Southwest Airlines for eVTOL routes and operational plans [10] - Archer will have two revenue streams: aircraft OEM (20-30% of revenue) and aerial ride-sharing (bulk of revenue) [11] Valuation and Market Potential - Archer trades at a forward price-to-book ratio of 3.48, lower than competitors Joby Aviation (3.72) and EHang (141) [12] - The company's $6 billion order book is 4.5x its current market valuation of $1.3 billion [12] - Analysts have a median 12-month price target of $9, implying a 152.8% upside from current levels [12] Future Growth and Opportunities - Archer is expected to achieve EBITDA breakeven by 2027, with significant revenue and margin growth projected beyond 2028 [9] - The company delivered its first Midnight aircraft to the US Air Force in Q2 2024, opening opportunities in defense sectors such as medical evacuation, cargo, and surveillance [14] - Archer's strong liquidity profile and partnerships are expected to drive further growth and order backlog expansion [14]