Innovation stocks can be incredible wealth escalators. Technological breakthroughs can open up new high-value markets or unlock unique ways to target underserved sectors.
Archer Aviation (ACHR 0.86%) and Viking Therapeutics (VKTX 4.41%) are prime examples.
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Archer Aviation aims to be among the first companies in the world to bring a low-noise, electric vertical take-off and landing (eVTOL) aircraft to market. Archer's experimental aircraft, Midnight, is designed to fly up to four passengers short distances and quickly recharge in a matter of minutes between trips.
Viking Therapeutics, on the the other hand, has designs on breaking into the lucrative weight loss drug market with its experimental therapy known as VK2735. VK2735 is far behind the leaders in the space in terms of development, but its impressive clinical profile has been turning heads on Wall Street of late.
Which of these speculative growth stocks is the better buy? Let's do a head-to-head comparison to find out.
Archer Aviation: Pioneering the urban air mobility revolution
Archer Aviation is at the forefront of addressing one of the most pressing issues in urban transportation: Traffic congestion and its associated problems of delays and pollution. The company is developing eVTOL aircraft, commonly referred to as "air-taxis," which promise to revolutionize urban mobility.
Archer's strategy is twofold: Launching an aerial ride-sharing platform and selling aircraft to select partners. With a plan to begin commercial operations by 2025, the company is racing to clear crucial regulatory hurdles that may determine its long-term success.
Financially, Archer reported cash and cash equivalents of $405 million in its latest quarterly report. However, innovation is costly, and that's evident from the company's $116.5 million loss in the first quarter of 2024. This hefty burn rate reflects the substantial investment required to bring a groundbreaking technology to market.
The potential of the eVTOL market is staggering, with analysts projecting its worth in the trillions. However, this valuation is largely predicated on developments expected post-2040, making precise quantification of Archer's upside potential challenging at this early stage.
Despite these uncertainties, Archer's current market capitalization of $1.23 billion seems modest compared to the projected growth of the eVTOL market over the next 15 years.
While the journey to profitability may be long, Archer's position as an early mover in this potentially transformative industry presents an intriguing opportunity for investors with a long-term perspective and high risk tolerance.
Viking Therapeutics: A top buyout candidate
Viking Therapeutics shares caught fire earlier this year in response to encouraging mid-stage data for its weight loss candidate VK2735.
The lowdown is that VK2735 appears to be a real contender in this high-value category, despite its late-comer status. Eli Lilly and Novo Nordisk already have their next-generation obesity drugs on the market, and by all accounts, their drugs seem to work wonders for people trying to shed a few pounds.
So what's all the fuss about? Wall Street analysts have suggested that VK2735 may generate peak sales in excess of $10 billion by the middle of the next decade.
There is one important problem, however. Most of this latent value is predicated upon a big pharma stepping into the picture through either a buyout or partnering deal.
Viking Therapeutics, after all, doesn't have the commercial infrastructure to compete effectively in this market, and building one would be enormously expensive.
The good news is that Viking Therapeutics' $5.53 billion market cap shouldn't prove to be much of a barrier to a deal.
Verdict
While both of these stocks have high ceilings, Archer Aviation is arguably the better buy. Archer Aviation is targeting one of the largest untapped markets on the planet, and while there are a lot of competitors, this eVTOL player is a leader in the space.
Viking Therapeutics, on the other hand, may require a helping hand from a big partner to realize its full potential. That introduces an element of risk into the equation that gives the edge to Archer Aviation in this comparison.