This eVTOL Stock Could Set Early Investors Up for Life

Confession: I've been wrong about Archer Aviation (NYSE: ACHR). Not totally wrong, but wrong enough to make me rethink the stock. In truth, I've been analyzing the stock too narrow-mindedly, with too much focus on its air taxi business and not enough on the other developments taking shape around it.

Two of those developments are in defense and autonomous technology. And I think they will make Archer one of the most formidable eVTOL businesses on the market.

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Archer's latest move could reduce future costs by a quarter

By now, you probably know what Archer is, or what it's trying to build. It's a frontrunner in the nascent electric vertical takeoff and landing (eVTOL) industry. Long term, it wants to operate an air taxi service, a kind of Uber (NYSE: UBER) in the skies, a transportation network to taxi people through the air to vertiports in major cities.

The urban mobility market, which includes eVTOL services, is expected to grow into a multitrillion-dollar market over the next several decades. That has also been one of the primary reasons to invest in companies like Archer, whose $4 billion-ish market cap could grow exponentially if this industry attracts the heavy demand expected of it.

Air taxi services will always be Archer's crown jewel, and the company has shown zero interest in backing away from that market. But since it can't actually operate an air taxi business yet, because FAA-type certification is stilling pending, the need for revenue has led it to make some surprising moves, one of which I'll talk about here.

That move was its recent decision to take three businesses from Boeing (NYSE: BA) in exchange for 19.75% of Archer's pre-close share count, plus two warrants for $100 million of stock apiece. All three cross into Archer's business in some way: Wisk designs eVTOLs, SkyGrid's software manages air traffic, and Insitu builds drones. But Insitu seems like the real prize right now. Let me put it this way: It is a profitable business that is generating $200 million in annual revenue. And for Archer -- whose second-quarter revenue was about $5 million -- any profit could stop a multimillion-dollar cash-burning hole that has seemed impossible to fill.

Insitu's revenue can help cash flow Archer's business in the short term. But, to return to my prediction, the purchase that could make Archer's business thrive isn't Insitu but Wisk.