Archer Aviation (NYSE:ACHR) is a speculative aviation stock that holds a $1.78 billion market cap, ranking 70th in the Aerospace & Defense sector.
That’s relatively impressive, considering the company provides investors with negative earnings, zero revenue, and no profit margin.
Of course, with plenty of speculative upside, the question is whether Archer Aviation has what it takes to become profitable sooner than many expect, or if this is a speculative aviation stock that will simply burn cash for indefinitely, before investors move on.
To be sure, there’s plenty of growth potential in the nascent eVOTL market. Electric vertical takeoff and landing aircraft are all the rage in key markets, specifically because this technology is so new, and permits are being granted.
However, the ultimate size of the market, and Archer’s role in this space, remain uncertain. Let’s dive into what investors may want to know about this speculative aviation stock right now.
Recent Updates
Archer Aviation’s stock continues to surge, seeing multiple days of 6-10% gains over the past week. These moves have followed various SEC filings of company executives purchasing shares.
Peter Lynch’s famous quote highlights insiders buy shares when they expect price growth. Archer Aviation’s executive team, including COO Tom Muniz, CFO Mark Mesler, CLO Andy Missan, and CPPO Tosha Perkins, recently invested around $246,000 collectively on Aug. 17, demonstrating their bullish sentiment about the company’s future.
Archer Aviation’s momentum is rising as it prepares to launch the Midnight electric flying vehicle, driving its stock price over 280% higher this year.
Although Archer hasn’t generated revenue, it gained FAA certification for the Midnight vehicle, allowing flight in limited U.S. airspace. First deliveries and commercial operations are anticipated in 2025.
ACHR Fundamentals
In Q2, Archer Aviation held $407.6 million in cash and short-term investments, with $25 million from Stellantis credit. The cash decreased by $42.3 million, showing an improved cash burn of $67.3 million compared to my previous estimate of $80 million.
Archer Aviation’s cash burn of $67.3 million ensures six quarters of funds ahead of 2025 commercialization. Besides $215 million from Stellantis, United Airlines, and Boeing, Archer’s deal with Boeing for autonomy tech is significant.
It could aid the company in a world with pilot shortages. Additionally, the parties have resolved litigation on undisclosed terms.
Keep in mind that the $215 million investment includes $70 million from Stellantis. Archer had three milestones: $145 million new funds, $70 million is accelerated, and $55 million remains undrawn.
With total investments, cash would be $677.6 million, allowing for 10 quarters of cash, supporting the path to 2025 commercialization.
The Bottom Line on This Speculative Aviation Stock
The outlook for ACHR stock remains speculative, yet the emerging urban air-mobility market’s potential is promising. Morgan Stanley forecasts $29B annual sales by 2030, projecting $1T by 2040.
Moreover, Cathie Wood’s previous Archer purchases were small, but her recent investment signals increased confidence. Thus, there’s plenty of speculative appetite for this stock right now.
While I’m still on the sidelines when it comes to Archer Aviation, I can understand the bullish thesis driving investors toward this potential hyper-growth name.
There’s plenty of potential risk and reward when it comes to ACHR stock, so this is an investment best made by those with the stomach for volatility, in my view.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
