Could Investing $50,000 in Archer Aviation Make You a Millionaire?

It wasn’t long ago that flying taxis were the stuff of science fiction. The technology needed to transport passengers economically through the skies above busy city streets simply did not exist.

As is often the case, time and innovation remove obstacles to compelling ideas. Lightweight yet strong materials and silent battery electric motors are now realities, making air taxis possible. Actually, Archer Aviation (ACHR -2.75%) makes them It hasn’t marketed them yet, but that milestone is visible on the horizon.

Could the air taxi market take off well enough to turn a $50,000 investment in this currently battered stock into a $1 million (or more) position anytime in the foreseeable future?

Archer Aviation is building a long-awaited type of aircraft

Archer’s jets are small, multi-passenger commercial aircraft capable of vertical takeoff and landing, but fly using wings for support like conventional airplanes once airborne. They truly offer the best of both worlds. However, they also offer a level of practicality that neither airplanes nor helicopters can offer on their own, thanks to their relatively quiet and convenient operation.

You see, while helicopters and airplanes are still powered by combustion engines that spin noisy propellers or helicopter blades, Archer’s main plane – Midnight – has a battery-powered electric motor and is 100 times quieter than a helicopter.

This could be a game changer for the urban mobility business. Commutes that might take one to two hours by car could be made in 10 to 20 minutes. These planes can also make many such trips per day, as Archer describes the recharge times for their lithium-ion batteries (the same type used in electric cars) as “minimum”. Airplanes are also relatively low maintenance compared to their more traditional counterparts.

Midnight’s prototypes have already completed more than 400 successful test flights this year in preparation for eventual Federal Aviation Administration (FAA) approval. The US Air Force is testing them as potential additions to its own fleet, recognizing the practicality of the Midnight. Automobile manufacturer Stellar is both an investor and a production partner. Archer’s medium-term plans involve increasing Midnight production to 650 aircraft annually.

Genuine, legitimate interest

Could Midnight be a solution to a problem that doesn’t exist?

Not long ago that would have been an easy conclusion to jump to. But several organizations seem to think that the eVTOL potential is real enough. Los Angeles International Airport is working with Archer Aviation to develop more “vertiports” in the Greater Los Angeles area, for example. Drop off and pick up locations may include Hollywood Burbank and SoFi Stadium, where the NFL’s Rams play their home games.

Similar plans are in the works for San Francisco, and other major cities in the US and abroad are on Archer’s radar, so to speak.

Perhaps more promising is the fact that potential partners adjacent to the air taxi industry are expressing interest. Southwest Airlines signed a memorandum of understanding with Archer to provide short-haul shuttle flights from California airports where the airline operates.

Meanwhile, even before the eVTOL achieved commercial certification, a company called Future Flight Global signed a contract to purchase up to 116 Midnight aircraft. That $580 million deal brought Archer’s prospective order book to $6 billion.

The driving force behind this growing interest is not just wishful thinking. Several market research outfits expect this convenience-driven market to discover now that the right technology is in place. Mordor Intelligence estimates that the global air taxi market will nearly quadruple to more than $4 billion a year between now and 2029, for example. This vision coincides with a forecast by the IMARC Group.

Lots of upside potential, but also lots of all-or-nothing risk

All of which leads us back to the original question: Could investing $50,000 in Archer Aviation today make you a millionaire? I might. But this is an answer that comes with a major asterisk.

The foreseeable caveats apply to this investment option. Not only is Archer pre-profit, it’s pre-profit (at least from product sales). While potential buyers have expressed $6 billion worth of interest, these are not committed orders. There is no guarantee that all of this interest will turn into actual income. And even if it does, there’s no guarantee that those sales will translate into profit.

There is also the distinct possibility that the market for air taxi services simply does not materialize as expected. Air travel of any kind has its unique risks, and even more so when the skies above urban areas become crowded. The FAA could refuse.

Then there’s the not-so-small matter of trade. Remember, for every transformative concept like carpooling that took off, there’s another paradigm-shifting business like meal kits that never lived up to expectations. Flying taxis appear to be an all-or-nothing, success/fail opportunity. There is no average level of demand here.

Given that short-haul air travel around major cities would really solve a lot of problems for a lot of people, though, the odds are good enough that the premise holds up. This should in turn drive predicted demand for Archer’s game-changing Midnight aircraft.

Beware of betting too much of your portfolio on this aggressive, high-risk game. While plenty of stocks have seen 20x growth in the past, most of the underlying companies were on firmer financial footing in more established industries than Archer Aviation is now. (Think Nvidia or Amazon.)

In other words, just because you have $50,000 of idle cash to invest right now doesn’t mean you should put everything into this idea. There are less risky ways to grow that kind of money into a seven-figure position. It would simply take longer than Archer could — if that kind of growth is really in the cards here.