For those who believe Ark Invest’s Cathie Wood knows how to spot disruptive growth stocks before they take off, Archer Aviation (NYSE:ACHR) is the next stock to watch. Most recently, Wood added nearly 250,000 shares of ACHR stock to its flagship Ark Innovation ETF (NYSEARCA:ARKK). Across all of Wood’s funds, Ark Invest owns nearly 10% of Archer Aviation, showing just how much belief Wood and her team has in the company.
Notably, this purchase is one among a recent string of buys in which Wood has continued to load up on the air taxi electric vertical take-off and landing (eVTOL) company. On a year-to-date (YTD) basis, ACHR stock has more than tripled, surging from less than $2 per share to start the year to more than $6 apiece at the time of this writing.
Let’s dive into what to make of these recent moves — and whether growth investors may want to follow Wood into this trade.
ACHR Stock Retains Its Strong Momentum
Today’s price action with ACHR stock isn’t really anything to write home about. The stock is down a little less than 1% in afternoon trading now and appears to be consolidating above the $6 level. For Cathie Wood, whose cost basis is a little below this level, it’s clear that at least a few growth investors believe there’s plenty more upside where that came from.
Much of this view comes from the company’s recent second-quarter earnings results, as well as a recent capital raise and a Department of Defense contract. Analysts have cited these catalysts as tailwinds for the company, as its growth trajectory appears to be much more de-risked and clear. Any sort of clarity with respect to Archer’s future commercialization path is also a positive and, in that regard, the firm has done well to provide investors with a more feasible story.
Cathie Wood clearly appears to believe that Archer Aviation has a real shot at eating up market share in what could be a lucrative sector. Of course, the early-stage nature of this company, as well as the sector it operates in, provides inherent risk. However, for those who believe that air taxis will be a meaningful market, perhaps the company’s $1.7 billion valuation is a bargain.
Until Archer shows it can be profitable, many investors may remain on the sidelines. That said, the capital appreciation with these stocks tends to come mainly in the unprofitable early years, as such companies ramp up. We’ll have to see how this trade ultimately works out for Wood, but it’s one to make note of for sure.
On the date of publication, Chris MacDonald did not hold (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.
