The idea of the green economy – that is, low or no carbon emissions – has caught on, with a strong social and political impetus behind it. This has become the driving force behind the expansion of renewable energy sources in utility-scale power generation and the increased production and use of electrically powered vehicles. At its core, this push is based on reducing the use of fossil fuels. However, there is one sector where moving away from fossil fuels has proven difficult.
Air travel is still primarily dependent on oil. Until recently, the technology to build viable battery-powered aircraft of sufficient size, lift, speed, and passenger/cargo capacity to truly meet an economic need simply did not exist. This is beginning to change, particularly in the area of short-haul urban flights. It's a niche segment, but amenable to a shift from fossil fuels to battery power.
Canaccord Genuity analyst Austin Moeller has delved deeply into the eVTOL (electric vertical takeoff and landing) class of aircraft, writing, “eVTOL aircraft capable of taking off from a conventional heliport (or vertiport) and carrying passengers.” “If we battery-only to get through the heavy traffic below, we have the potential to significantly reduce carbon emissions in large urban areas and eliminate traffic congestion by blowing up.”
“Based on our estimates,” added Moeller, “roughly 15% of trips to and from airports and 5% of long-distance regional travel could be replaced by eVTOL aircraft, potentially reaching 45 million monthly active passengers within the next decade. “With a target ticket price of around US$107 for an airport flight, we estimate that the TAM for eVTOL travel in metropolitan areas could be worth nearly US$58 billion by 2033.”
Moeller not only praises the industry in general, but also gives a specific recommendation for an eVTOL share that investors should consider. Despite the speculative nature of this company, Moeller forecasts a remarkable growth potential of ~140%. This bullish outlook is shared by other analysts as the stock is rated a Strong Buy according to TipRanks database.
Archer Aviation (ACHR)
Archer develops the Midnight Plane, a short-range urban commuter aircraft designed to fly distances of up to 100 miles. When Midnight is enlarged to full size, short flights of up to 20 miles can be made in a row, with a charge time of just 12 minutes in between. The aircraft design includes six independent battery packs, each connected to a pair of electric motors, with space for one pilot, four passengers and luggage. With speeds of up to 150 miles per hour and an optimized range of 20 to 50 miles, the aircraft aims to act as an urban connector and air taxi, economically connecting major airports within a larger metropolitan area.
Archer is already working with a major airline partner, United, to make eVTOL air taxi routes a reality. The two companies announced in March of this year the first commercial electric air taxi route to launch in Chicago. The connection will connect Chicago's O'Hare Airport, one of the largest in North America, to Vertiport Chicago, North America's largest VTOL and landing facility. Vertiport is in the famous Loop; The agreement between Archer and United will connect the loop directly to O'Hare.
This unique aerospace company is also collaborating with car manufacturer Stellantis to boost production of the Midnight. Stellantis will provide the manufacturing technology and expertise, as well as experienced factory personnel and available capital, to take the Midnight beyond the prototype stage into mass production. Archer's goal is to have 6,000 aircraft in service by 2030. Archer and Stellantis will jointly attend the 2023 Paris Airshow, which begins June 19. The companies will jointly showcase the Midnight eVTOL at the Air Mobility event.
While Archer is still in the pre-sale-only phase for now, the company is aiming to begin commercializing the Midnight in 2025. In its Q1 23 report, Archer noted that the first Midnight aircraft has passed final assembly and is ready for test flights this summer as the FAA certification program progresses. Archer has ample liquidity to sustain operations with cash on hand of $450 million as of March 31 and $150 million in strategic funding from Stellantis.
It's all an impressive start for Canaccord's Austin Moeller. The analyst writes, “We believe Archer's strong established relationships with a major airline (United) and a major global automaker (Stellantis) will give the company an intellectual, technical and financial edge over its other competitors in the eVTOL industry , as intended.” Expansion of production and delivery of the Midnight aircraft. Given the strong demand from airlines to reduce carbon emissions and the vested interests of major metropolitan areas in reducing smog and congestion, we believe that Archer's Midnight aircraft will make a significant contribution to sustainable air travel and short- to medium-haul flights the city could afford centers to airport hubs and surrounding suburbs.”
Looking ahead, Moeller rates ACHR stock as a Buy with a price target of $9, suggesting strong upside potential of about 140% within a year. (To see Moeller's track record, Click here)
Like Canaccord, the rest of the public is optimistic about ACHR. Based on the 4 buy ratings issued in the last three months and a 129% upside potential, it is clear that this “strong buy” eVTOL stock has a lot to offer. (See ACHR Stock Forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is for informational purposes only. It is very important to do your own analysis before investing.