As broad market sentiment turns negative, short sellers are striking while the iron is hot. They are upping their bearish bets on risky stocks like Archer Aviation (NYSE:ACHR). Now may be a great time to fade speculative growth plays in general. Yet with Archer Aviation stock, the so-called “smart money” could be making a big mistake.
No, I’m not saying that ACHR is en route to becoming the next big meme stock like AMC Entertainment (NYSE:AMC) or GameStop (NYSE:GME), surging higher on hope and hype, squeezing the shorts in the process. Rather, there is much that signals that this electric vertical take-off and landing startup is steadily approaching its “liftoff moment.”
Even before said “liftoff” occurs, the further hitting of milestones may be enough to send shares moving in the right direction again, and send the short-sellers packing.
That said, if you want to make a long-term bet on Archer, don’t buy right this second. You may want to wait until after an upcoming event to make this wager.
Archer Aviation Stock and Rising Short Interest
According to Fintel, Archer Aviation’s short interest as a percentage of float has jumped from 15.5% to 28% since June 28.
Although the aforementioned changes are driving much of the jump in short interest, there’s another factor that helps to explain why ACHR in particular has been targeted by the short side.
Just prior to the start of its latest sell-off, Archer Aviation stock was on a tear. From late June to early July, the stock soared from just over $3 per share, to prices north of $5 per share.
Shares did experience this run-up due to a series of promising developments. However, it’s possible that the shorts viewed it as an overreaction.
Still, while neither of these recent news items has led to a fast exit out of the pre-revenue stage for Archer, it’s possible that those shorting ACHR are underestimating their impact on the long-term bull case for shares.
So, what are the recent developments in question? First, a major capital infusion from one of Archer’s deep-pocketed strategic partners.
Second, news of this early stage company forming another partnership with a major airline. Far from being overhyped, each one serves to bolster the bull case.
Recent Commercialization News is Nothing to Sneeze At
In 2024, Archer Aviation has continued to make progress towards commercialization. For instance, the company has successfully completed several flight tests of its flagship Midnight eVTOL aircraft.
As I have noted in past coverage of Archer Aviation stock, Archer has also obtained certification from the Federal Aviation Administration to begin operating a commercial airline.
As mentioned above, since July, Archer has made several other major announcements. Neither of these are anything to sneeze at.
On July 2, Archer announced that Chrysler and Fiat parent Stellantis (NYSE:STLA), a key strategic investor, has invested an additional $55 million into the company.
This is on top of $110 million invested during a funding round last year. It’s promising that Stellantis, despite its own issues, is willing to continue investing in this venture. This suggests that further financing may not necessarily dry up, if economic challenges persist.
Second, on July 12, Southwest Airlines (NYSE:LUV) signed a memorandum of understanding with Archer Aviation.
This may be the first step towards Southwest partnering with the company to operate air taxi routes. Archer already has such a partnership with United Airlines (NASDAQ:UAL), another major U.S. carrier.
Bottom Line: Pounce on ACHR After This Upcoming Event
Since the Stellantis and United news, Archer Aviation has continued to announce meaningful developments, including a recent press release that indicates that its flagship manufacturing facility in Covington, Georgia is nearing completion.
However, there is an upcoming event that may drive another pullback for ACHR shares. That would be the company’s next quarterly earnings release, scheduled to happen post-market on Aug. 8.
Given current stock market trends, the short side could use this event as an excuse to further bid down Archer. Fairweather fans of the stock could make an exit post-earnings as well.
Still, if ACHR coughs back its recent gains, and falls down to its 52-week low of $3 per share again, consider it time to pounce. Like I’ve noted before, Archer is an early mover in what end up being a trillion dollar industry less than two decades from now.
For those patient enough to ride out growing pains and high volatility could be rewarded, when this company begins to get off the ground, both literally and figuratively.
On the date of publication, Thomas Niel 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
