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 Archer Aviation 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 Archer Aviation 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.

Should you buy Archer Aviation shares today?

Before you decide, please take a moment to review this first.

Because my colleague Mark Rogers – The Motley Fool UK’s Director of Investing – has released this special report.

It’s called ‘5 Stocks for Trying to Build Wealth After 50’.

And it’s yours, free.

Of course, the decade ahead looks hazardous. What with inflation recently hitting 40-year highs, a ‘cost of living crisis’ and threat of a new Cold War, knowing where to invest has never been trickier.

And yet, despite the UK stock market recently hitting a new all-time high, Mark and his team think many shares still trade at a substantial discount, offering savvy investors plenty of potential opportunities to strike.

That’s why now could be an ideal time to secure this valuable investment research.

Mark’s ‘Foolish’ analysts have scoured the markets low and high.

This special report reveals 5 of his favourite long-term ‘Buys’.

Please, don’t make any big decisions before seeing them.

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

Prediction: 12 months from now, £5,000 invested in Tesla stock could be worth…

Tesla stock has endured a miserable year so far, falling by 29%. Muhammad Cheema takes a look at how it…

Read more »

Investing Articles

See what £10,000 invested in Tesla shares at their mid-December peak is worth today 

As the world absorbs the full scale of Donald Trump's tariffs, Tesla shares are reeling. Investors who bought the stock…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Dividend Shares

2 ‘safe’ LSE dividend stocks to consider as global markets sell off

As global markets experience high levels of volatility due to economic uncertainty, investors are piling into these ‘safe-haven’ dividend stocks.

Read more »

Investing Articles

US stock market rout: an unmissable opportunity for investors?

His tech-heavy portfolio has been smashed by Trump’s tariffs. However, Dr James Fox believes there could be some opportunities in…

Read more »

Investing Articles

After a 13% ‘Trump tariff’ fall, is the Barclays share price too cheap to miss?

Does the Barclays share price fall mean we should all panic and run screaming from the stock market? Nah, of…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

2 investment trusts to consider for a Stocks and Shares ISA

These two investment trusts have a different focus -- but our writer sees both as worth considering, one more for…

Read more »

Investing Articles

Deutsche Bank reiterates Buy rating on 9.6% yielding FTSE 250 stock that was “most shorted in UK”

Our writer investigates why a major broker remains optimistic about a FTSE 250 stock that was once the most shorted…

Read more »

Investing Articles

2 things to remember when stock markets are turbulent

US trade policy has rattled the stock markets in New York, London and elsewhere. Our writer outlines a couple of…

Read more »