If you grew up watching The Jetsons, your idea of the future probably looked something like aerial cars zipping through cities, video-chat, androids, and flat-screen TVs. Surprisingly, reality has caught up to The Jetsons in many ways, yet one of its most iconic technologies — flying cars — largely remains in the realm of science fiction.
For now, at least.
Archer Aviation (ACHR +4.10%) is one of several aviation companies trying to make a version of flying cars real. Its Midnight aircraft is an electric vertical takeoff and landing (eVTOL) craft designed to fly passengers above congested city streets at speeds approaching 150 miles per hour. Although the aircraft looks like a drone converted into a helicopter, it’s designed to be quieter, cleaner, and more efficient for short urban hops in crowded cities.
Image source: Archer Aviation.
That’s the dream, and so far Archer has yet to complete a piloted transition flight (that is, transitioning from vertical to horizontal with a cockpitted pilot). Archer stock, meanwhile, has dipped pretty far into the red, trading today almost 50% lower than its initial listing price.
With this in mind, let’s do a round of buy, sell, and hold: Which is best for long-term investors?
Archer is a fledgling with dreams of becoming an albatross
Archer Aviation is, to state the obvious, a speculative stock. True, every stock involves some level of speculation — no investor can predict the future — yet the speculative nature of Archer is such that its business exists almost entirely in hypotheticals rather than concrete production and sales.
No, this is not a company that generates significant revenue. Nor does it have a fleet of eVTOLs ready for flight. That’s why Archer is often talked about in the conditional tense. It could be a millionaire-maker, if such and such conditions are met, if FAA type certification is achieved, and annual production of eVTOLs grows from a handful today to its goal of manufacturing 650 aircraft annually.
Could-be, however, isn’t will-be, and Archer has formidable obstacles to overcome before it makes ambitious dreams a reality. To date, the company has produced fewer eVTOLs than a hand has fingers, and its multi-million dollar quarterly cash burn means even its sizable liquidity position (roughly $1.8 billion in cash, equivalents, and investments) may give it two to three years of runway before it’ll need a fresh cash injection.
Today’s Change
(4.10%) $0.22
Current Price
$5.58
Key Data Points
Market Cap
$4.2B
Day’s Range
$5.25 – $5.58
52wk Range
$4.80 – $14.62
Volume
719.8K
Avg Vol
39.5M
Gross Margin
-120526.32%
The tallest hurdle — or the one that absolutely must be cleared for Archer to remain in business — is obtaining FAA type certification for Midnight. Recently, Archer completed Phase 3 of the FAA’s four-phase process, the first eVTOL company to do so.
That “first,” however, comes with a big asterisk. Yes, it is the first to complete Phase 3, but it’s not the leader on the FAA timeline. That position indubitably belongs to Joby Aviation, which is working on an older FAA process, one with five stages instead of four phases. Joby has been in stage four, which involves “for-credit” flight testing, for over a year. Meanwhile, Archer’s transition into Phase 4 means it will now physically test its aircraft with the FAA watching.
Given the immateriality of Archer’s business right now, this stock is a buy only for very aggressive investors who can stomach losses should delays or setbacks derail its plans. Archer stock has potential to go vertical from here, but “potential” isn’t reality, and the stock could certainly go vertical in the opposite direction.
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