What's Up
Today's surge in Archer Aviation's stock value can be attributed to:
The United States Air Force is edging closer to possibly purchasing planes from Archer Aviation (DECrease of 3.08% in ACHR shares), and investors are jumping on board this train. Stocks of the aviation innovator surged as much as 30% on Monday, following news of an expanded partnership with the government.
So What's Up
Archer Aviation is among several companies developing commercial electric vertical takeoff and landing (eVTOL) aircraft, capable of carrying a few individuals on brief flights. Known as "flying taxis," these eVTOLs are likely to alleviate traffic congestion or provide transportation for airline passengers from suburban areas to major airports. However, the military is also recognizing their potential uses.
On Monday, Archer confirmed that the Air Force intends to purchase up to six of its Midnight aircraft, totaling up to $142 million. This expanded partnership involves sharing flight-test data and certification reports, pilot training, and planning for maintenance and repair operations.
CEO Adam Goldstein stated, "We are thrilled to collaborate closely with the United States Department of Defense and the United States Air Force in integrating Midnight into their operational fleet, with a focus on transportation, logistics, and rescue operations."
The Air Force is now among Archer's prominent partners, joining United Airlines Holdings and Stellantis.
Now What
This agreement benefits both parties. For the Air Force, it's a reasonable investment to stay updated on advanced technology. For Archer, it's an opportunity to secure a significant buyer in the aviation industry. But investors must be mindful of not getting too excited.
As veteran defense contractors will attest, the U.S. government does not form exclusive long-term commitments with any single supplier. If eVTOLs prove successful, Archer and its competitors will undoubtedly have numerous chances to sell to military customers. Archer, for now, is focused on getting the Midnight eVTOL certified by the Federal Aviation Administration and aims to launch commercial operations in 2025.
Archer's shares have risen by an impressive 225% this year, though they're still below their record highs from early 2021, having dropped more than 60%. Investors should take note that the journey to success is far from over.
The potential purchase of Archer Aviation's planes by the United States Air Force represents a significant financial opportunity for the company, which could attract more investors interested in the aviation sector. To efficiently utilize the Air Force partnership, Archer needs to focus on getting its Midnight eVTOL certified and launching commercial operations by 2025, ensuring financial growth and continued investing prospects.
