Down 23% in a day but up 148% in 2 months, is this $7 growth stock a buy for me?

Why was there a massive fall in the share price of Archer Aviation (NYSE:ACHR) yesterday? And is this a growth stock I’d now consider?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Smart young brown businesswoman working from home on a laptop

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Red-hot growth stock Archer Aviation (NYSE: ACHR) hit a turbulent patch yesterday (2 December), ending the day 23% lower. Yet shares of the flying-taxi company are still up 148% in just two months!

Should I buy the dip? Let’s discuss.

Created with Highcharts 11.4.3Archer Aviation PriceZoom1M3M6MYTD1Y5Y10YALL18 Dec 20203 Dec 2024Zoom ▾Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '2420212021202220222023202320242024www.fool.co.uk

What is Archer?

Archer Aviation is one of a handful of companies racing to commercialise electric vertical take-off and landing (eVTOL) aircraft. In other words, electric aircraft capable of taking off and landing much like helicopters, but with far less pollution and noise.

Should you invest £1,000 in Airbnb right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Airbnb made the list?

See the 6 stocks

These air taxis are potentially ideal for urban areas. They could bypass congested roads, dramatically reduce travel times, and lower emissions.

For example, Archer plans a flying taxi network in Los Angeles (where traffic is horrendous) in early 2026 to turn an hour-long ground commute into minutes in the air. How so? Well, with no road congestion and traffic lights to contend with, its eVTOLs can travel uninterrupted at speeds of up to 150 mph!

The firm plans to operate an Uber-like ride-hailing service, as well as sell its aircraft (called Midnight) to third-parties. Its preliminary order book now exceeds $6bn.

In September, the US’s Federal Aviation Administration (FAA) approved eVTOLs. It was the first new category of aircraft regulated by the agency since the introduction of helicopters nearly a century ago.

Uncertainty has landed

The company is backed by Stellantis, which owns Fiat and Vauxhall. In August, it committed up to $400m to scale Midnight production to 650 aircraft annually at Archer’s Georgia facility through to 2030.

And this likely explains yesterday’s sell-off, as Stellantis CEO Carlos Tavares abruptly resigned over the weekend. The carmaker’s sales have been sluggish, forcing it issue a profit warning in September.

Tavares was supportive of Archer’s ambitions. But will the next CEO be as willing to keep pumping money into a speculative eVTOL venture? My hunch is yes, given the significant investments already made. But it adds uncertainty, and the market hates that.

US vs UAE

Archer ended Q3 with $502m in cash. However, it lost $115m in the quarter, so will clearly need further injections of cash to ramp up production of its aircraft. Shareholders therefore face the risk of dilution.

That might not matter long term, assuming the company can achieve commercial success. This is where another risk arises though, as the company is still waiting to achieve full certification for its aircraft.

It’s nearly completed Phase 3 of the FAA’s type certification process, while advancing through Phase 4, the final phase. So it’s on track to begin operating in late 2025 or early 2026.

However, the United Arab Emirates (UAE) may pip the US to launch the world’s first electric air taxi routes. There’s a bit of a race on between the two nations, and Archer aims to start services in the UAE in late 2025.

Source: Archer Aviation, Q3 2024 shareholder letter

My move

To gain exposure to this industry, I’ve invested in rival Joby Aviation (backed by Uber).

The two at a glanceJoby AviationArcher Aviation
Founded20092018
Market cap$5.5bn$2.6bn
Cash position$710m at the end of Q3, with a further $722m raised since$502m at the end of Q3, with another $400m on the horizon
AircraftOne pilot and four passengers at speeds of up to 200 mphOne pilot and four passengers at speeds of up to 150 mph
Design approachVertically integratedRelies on aerospace suppliers for components
Manufacturing partnerToyotaStellantis
Expected commercial launchLate 2025Late 2025

These stocks are highly speculative and carry a lot of risk, so I don’t want both in my portfolio.

However, this is also a potentially massive emerging market. I’m happy to hold one long term.

But there are other promising opportunities in the stock market right now. In fact, here are:

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Ben McPoland has positions in Uber Technologies. The Motley Fool UK has recommended Uber Technologies. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Up 30% in weeks, does the BAE Systems share price still offer value?

The BAE Systems share price has been on a tear over the past couple of months. This writer sees limited…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Hunting for shares to buy as the market trembles? Remember this!

After a choppy week in global stock markets, our writer goes back to basics in his hunt for bargain shares…

Read more »

Investing Articles

3 simple principles to help build wealth in an ISA

As a new tax year opens up new ISA allowances for many investors, our writer shares a trio of things…

Read more »

Investing Articles

US trade tariffs: what they could mean for UK shares like Ashtead, Compass Group, and Experian

US trade tariffs continue to rock global markets, and the UK is no exception. Our writer considers how a new…

Read more »

Mindful young woman breathing out with closed eyes, calming down in stressful situation, working on computer in modern kitchen.
Dividend Shares

The Trump slump has smashed these FTSE 100 shares!

After a rough week for US and UK shares, investors have been shaken. But now these FTSE 100 stocks have…

Read more »

Investing Articles

£10,000 invested in Rolls-Royce shares 5 years ago is now worth…

Rolls-Royce shares have been on fire since April 2020. Part of this is the result of pandemic restrictions lifting, but…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

£10,000 invested in Tesla stock at its peak in 2024 is now worth…

Over the last few months, Tesla stock has lost nearly half its value. Here, Edward Sheldon explores a few takeaways…

Read more »

Investing Articles

Is the S&P 500 heading for an epic stock market crash?

Our writer shares his thoughts on a very crazy time for the S&P 500 and the wider stock market. How…

Read more »