Archer Aviation (NASDAQ:ACHR) stock has been getting a lot of attention.
Companies like this that are selling the future can’t tell investors exactly when the future will arrive. Archer is a leader, along with Joby Aviation (NASDAQ:JOBY), in developing electric vertical takeoff and landing craft.
These can operate like a helicopter but use quieter, non-polluting electric motors.
By having several rotors they’re more flexible than helicopters, presumably safer, thus perfect for whisking rich commuters from home to airport.
Archer still lacks revenue but holds great promise. Investors have been piling in. On September 11 Archer stock peaked at $6.81 per share.
Since then, analysts have admitted the future is not now, so ACHR stock trades around $4.78.
The ACHR Stock Story
Serial entrepreneur Brett Adcock, who left management soon after it went public to work on humanoid robots, started Archer.
Don’t go running to the dealer for your electric car. Archer’s recent $142 million deal with the Air Force is for 6 of its Midnight units. The cash will come after they deliver the units.
Prices should decline as production scales. Archer has a production contract with Stellantis (NASDAQ:STLA), and United Airlines (NYSE:UAL) has placed an order worth $1 billion.
The regulatory skies also look clear. The Federal Aviation Administration has a roadmap indicating service could start in 2025. Archer is building a factory in Covington, Georgia.
Archer’s Risks
While Archer has made a good start, it’s far from alone. Along with Joby there’s privately held Beta Technologies. There are also multiple Chinese players, including electric vehicle maker Xpeng (NASDAQ:XPEV).
Archer’s connections to the military, and the end of its long-running legal battle with Boeing (NYSE:BA), which bought rival Wisk last year, give it an advantage.
But success is far from guaranteed. Archer ended June with just $407 million in cash, after losing $181.4 million in the previous three months. They will need more capital to bring Midnight home.
Slow Your Roll
Archer has name brand backers, a clear regulatory field, a working prototype, and a manufacturing plan. There are analysts pounding the table for it, telling investors to buy the stock now.
What it lacks is a revenue stream.
That’s why our David Moadel recently suggested investors slow their roll into ACHR stock. Management isn’t expecting scaled operations until 2028 and it will take billions of dollars to get from here to there.
Right now, there are still just 5 analysts following Archer at Tipranks. While four are telling investors to buy it, their price target is just $8, not much above its August high.
Investors who got in at Archer’s early 2021 IPO were burned by the hype. The shares are still down by half from their initial trade. This has brought the plaintiff’s bar out in force, hopeful of filing a class action suit saying Archer exaggerated its progress when it came public.
The Bottom Line on ACHR Stock
I have spent most of my life getting into things too early. By the time the story is told I have usually moved on.
I believe Archer can succeed, but it won’t be tomorrow. The company will need more capital to get into the air, which at this point can only mean an equity dilution.
But those who bought the IPO hype were burned, and revenue is still a few years away. There’s a lot of competition and you’re betting on engineers to do things that haven’t been done before.
If you buy Archer today, write off the expense, knowing the electric car is far away. George Jetson was just born last year.
As of this writing, Dana Blankenhorn 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.
