Archer Aviation (ACHR 0.35%) is developing a promising business in electric vehicle take-off and landing (eVTOL) aircraft that will eventually include sales of its Midnight copter and an air taxi service.
But the company has yet to sell any aircraft, and the taxi service is in the very early stages. The company’s share price has also tumbled 14% year to date amid tariff and economic uncertainty.
With Archer Aviation stock priced under $10 as of this writing, is it time to buy, or is it better to leave this stock alone for now? Despite its momentum, I think it’s best to pass on Archer for now. Here’s why.
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Archer has significant momentum
One of Archer’s most interesting opportunities comes from its air taxi pursuits, and the company already has its first customer. Abu Dhabi, capital of the United Arab Emirates, is the company’s launch partner and says the partnership is helping it create a “playbook” for bringing the service to dozens of other customers.
The company is also working with United Airlines to explore the possibility of launching an air taxi service between Manhattan and surrounding airports. The air taxi market is still relatively small right now, but could be worth an estimated $80 billion by 2033.
As the air taxi opportunity unfolds, Archer has other irons in the fire as well, including developing a eVTOL for the U.S. Department of Defense. The deal could be worth up to $148 million, which is substantial considering Archer has yet to generate any revenue.
What’s more, Archer is in the process of manufacturing and selling its Midnight aircraft, with the goal of completing 10 aircraft this year. It already has some conditional purchase agreements, including with United for up to 100 aircraft, worth $1 billion.
Why it’s probably best to pass on Archer for now
It’s a precarious time to be an eVTOL upstart. First, sourcing all of the parts for the Midnight aircraft could be much more expensive if President Donald Trump’s tariffs stay in place. For example, Archer works with a battery supplier from Taiwan, which currently has a 10% tariff on its imported goods.
While the full impact is still unknown, tariffs could add $8 billion in costs to automotive manufacturers and battery producers in the U.S. by some estimates. And you can bet that a battery-powered electric aircraft will feel some of those costs as well.
Additionally, the semiconductors in the Midnight aircraft could eventually be subject to tariffs as well. The Trump administration has, for now, exempted processors from tariffs but said recently that they’ll be coming soon.
Trump’s tariffs have caused many companies to rethink their outlook for this year, and while Archer hasn’t announced any changes, the tariffs could certainly affect the company’s goals. The company plans to ramp up production to two aircraft per month by the end of this year with a goal of producing 650 annually by 2030. Tariffs, or an economic slowdown created by them, could easily slow its current plans.
Even before Trump announced his tariffs, I think investors were being a little overly optimistic about Archer. Its share price has skyrocketed 110% over the past year, yet the company has no revenue. But when you add in Trump’s tariffs and the potential they have to slow the economy, the stock looks even more speculative than before.
I think investors should wait to see how all the tariff uncertainty plays out and assess any impact on the economy before buying this stock. Tough times could be ahead for any company manufacturing battery-powered vehicles — even flying ones.
Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.