Stock Market

Archer Aviation Stock Is Simply Too Speculative to Buy Now

Archer Aviation Inc (NYSE:ACHR) holds a $1.78 billion market cap as of August 21, 2023, ranking in the 70th percentile of Aerospace & Defense industry.

Archer lacks a significant price-earnings ratio due to negative earnings over the past 12 months, with zero revenue and no profit margin.

Analysts project an adjusted earnings of -$1.236 per share this fiscal year, with no dividend payout.

In this speculative sector, Archer’s value depends on their ability to develop and launch their purpose-built electric aircraft for short-range travel. But is it worth an investment?

Recent Updates

Archer Aviation’s stock surged as the eVTOL firm concluded an oversubscribed $215 million PIPE investment round. Stellantis added $55 million, increasing Archer’s total liquidity to $675 million.

Archer Aviation secured major investments in its recent PIPE funding, including from United Airlines and ARK Investment Management. The oversubscribed PIPE reflects long-term growth potential and Archer’s commitment to sustainable mobility.

Archer’s recent PIPE announcement led to active trading, with over 3.5 million shares exchanged, though the stock is down 3.1% today, still up 229% year-to-date.

Archer and the Boeing Lawsuit

ACHR stock rose 2% last week as the air taxi manufacturer settled with Boeing. The agreement involves Boeing’s investment in ACHR in exchange for stock. Archer specializes in electric vertical takeoff and landing aircraft, electric-powered helicopters designed for short-distance urban travel.

Boeing subsidiary Wisk, involved in eVTOLs for air taxis, previously sued Archer for patent violations. In a recent settlement, Boeing will invest in Archer through a $215 million funding round.

Stellantis, United Airlines, and ARK Investment Management are also part of the investment. Boeing’s contribution aims to boost Wisk and Archer’s collaboration on autonomous flying.

Stellantis’ Support to Archer

Archer Aviation’s shares surged 14% on June 26, following a 10.6% stake acquisition by Stellantis, known for Dodge Ram trucks and Jeep SUVs, in the eVTOL company.

Stellantis acquired a 10.6% stake in Archer Aviation, purchasing 6.3 million shares at an average price of $3.94 each, with potential to increase to 12.5%. Investors are pleased with Stellantis’ backing.

Despite Archer’s declining cash position, Stellantis’ continued investment signals strong confidence.

However, the show of support might not be as substantial as it seems. Unlike Archer, Stellantis is financially robust, possessing $52.6 billion in cash.

A $25 million investment in Archer, although potentially rewarding, is relatively minor for Stellantis, holding the possibility of a significant return if Archer succeeds in the air taxi sector and Stellantis attains a 10% ownership.

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.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.