Rubbing salt in the wounds was rival Joby Aviation (NYSE: JOBY), the stock I doubled down on with the cash from that Archer sale. Until recently, it was ‘only’ up about 40% over this period.

So I was beginning to think I might have backed the wrong horse, especially after Archer signed a deal with Palantir earlier this year to “build artificial intelligence (AI) for the future of next-gen aviation technologies“.

However, two pieces of news have recently sent the Archer and Joby share prices on divergent flight paths. Here’s what has happened.

The Archer news

Archer Aviation is aiming to launch an air taxi service in Abu Dhabi by the end of 2025 with its Midnight electric vertical take-off and landing (eVTOL) aircraft. In Q1, it said everything had gone splendidly, and it had more than $1bn on the balance sheet.

Founder and CEO Adam Goldstein commented: “Archer’s pushing the boundaries of what’s possible and reshaping the future of aviation for years to come.” The stock jumped 23% after this bullish update.

However, it plummeted 20% a couple of weeks ago when short-seller Culper Research released a report accusing Archer of misleading investors. It said the firm’s Midnight eVTOL isn’t as far along as management has claimed, while also highlighting design changes that might suggest aircraft stability problems.

In response, Archer called the claims “baseless“, and said Culper is “not a credible research institution“.

The Joby news

By contrast, Joby stock surged 27% this week following the closure of a $250m investment from partner Toyota. This funding supports the firm’s progress toward FAA certification and commercial production of its electric air taxis.

Founder and CEO JoeBen Bevirt commented: “We’re already seeing the benefit of working with Toyota in streamlining manufacturing processes and optimising design.”

Joby remains on track to launch its service in Dubai later this year, but there could always be regulatory setbacks. Meanwhile, flying passengers safely from Manchester Airport to Leeds in just 15 minutes — instead of one hour+ by car or train — is still unproven.

My foolish takeaway

In my experience, reports from short-sellers need to be taken seriously, even though they have a financial incentive to see the stock in question fall. It definitely adds risk to the investment case because Archer hasn’t addressed any of the specific accusations yet.

That said, you can normally gauge how seriously other investors take the claims by the severity of the share price reaction. In Archer’s case, it’s 20% lower than before the report, but still up 27% in the past month and 230% over a year. Heavyweight partners like United Airlines and Stellantis add weight to its technology.

For investors looking to invest in this exciting space, I think Joby is worth a look at $8. But both these stocks are high risk because eVTOLS haven’t been approved by the FAA yet, meaning each firm is pre-revenue and therefore loss-making.

Still, at least recent developments have eased my concern that I backed the wrong horse.

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At $7.50 as I write, the stock is up 49% over the past year. That’s a very solid return by any stretch of the imagination.

So, why do I think I might have backed the wrong horse? Let me explain.

Revolutionising short-distance travel

Joby’s eVTOLs can take off vertically like a helicopter and fly like a drone. They transport a pilot and four passengers in near-silence at speeds of up to 200mph. A flight can replace a one-to-two-hour drive with a journey that takes 10-20 minutes, potentially saving hours sitting in traffic.

The firm’s first commercial service is on track to launch later this year in Dubai, where construction of a vertiport at the international airport is underway.

But Joby isn’t the only game in town. Another eVTOL company called Archer Aviation (NYSE: ACHR) is also racing to commercialise an air taxi service. The stock jumped 22% on 13 May, bringing its one-year gain to 253%!

Reassessment

Symbolically, this means that Archer’s market cap of $7.3bn has overtaken that of Joby ($5.7bn) for the first time. A year ago, Joby’s was more than twice Archer’s — the clear leader. So investors have reassessed the competitive dynamics here.

Like Joby, Archer is set to launch a commercial service in the Middle East at the end of this year (in Abu Dhabi). Both have similar amounts of cash on the balance sheet and are progressing well towards securing aircraft certification with the US Federal Aviation Administration (FAA).

So, what’s the difference? Well, in its recent Q1 results, Archer said it was partnering with Palantir to “build artificial intelligence (AI) for the future of next-gen aviation technologies“. It’s already partnered with defence start-up Anduril to leverage cutting-edge AI technology to make a military eVTOL.

Therefore, the company is moving quickly to secure innovative defence partnerships. There might be early evidence emerging that ambitious Archer is more forward-thinking than Joby.

None of this would have bothered me a year ago. Back then, I owned both stocks. However, I decided to get off the fence and go with one over the other. With Archer stock up over 200% since I sold it, that’s looking like a mistake.

High-risk, high-reward stock

Some analysts envision a $1trn market for eVTOLS over the next decade. But there are plenty of operational and regulatory risks to navigate for both companies. There could be delays or a safety incident that sets the whole industry back.

In Q1, Joby had completed 62% of the fourth stage of aircraft certification (of five). It had $813m in cash, plus an additional $500m commitment from backer Toyota. It also announced a partnership with Virgin Atlantic to launch air taxis in the UK.

It’s too early to say if I backed the wrong horse. But the fact one is outperforming the other by a wide margin is a little disappointing.

Long term, I’m still bullish on Joby, as eVTOLs should be a massive growth market. Fact is though, we don’t know what margins will look like, meaning this stock is only suitable for investors with a stomach for high risk.

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Gene-editing

First up is biotech firm Crispr Therapeutics (NASDAQ: CRSP) which pioneered the Nobel Prize–winning CRISPR/Cas9 technology to edit genes.

A year ago, it had its first treatment, Casgevy, approved for sickle cell disease and beta-thalassemia, rare blood disorders that are often debilitating for sufferers.

Crispr Therapeutics and its partner Vertex Pharmaceuticals have started to collect cells from 50 patients. These will be edited outside the body and reinfused into the patient with the aim of curing them. The NHS is currently rolling out Casgevy.

Looking ahead, the two companies have identified some 58,000 patients in the US, Europe and the Middle East. At a cost of around $2.2m a patient, the revenue opportunity over the next few years could be in the billions (Crispr will get 40% of sales with the rest going to Vertex).

The firm also has a promising gene-editing candidate for blood cancers in the clinic, as well as a potentially revolutionary treatment for type 1 diabetes that aims to restore insulin production.

Naturally, the biotech’s vulnerable to setbacks in these clinical trials. And given the firm’s lack of revenue, never mind profits, the negative impact on the share price would likely be sizeable.

Nevertheless, the company had $1.9bn in cash toward the end of last year, which is enough to fund its exciting pipeline of treatments.

With the share price down 39% over one year, and the firm sporting a modest $1.5bn enterprise value, I think Crispr Therapeutics stock is worth considering.

Ready for lift-off?

Next up is Archer Aviation (NYSE: ACHR), which is racing to commercialise electric vertical takeoff and landing (eVTOL) aircraft. These take off vertically like helicopters but are near-silent and far greener, making them perfect for congested urban cities (Los Angeles, New York, Tokyo, Abu Dhabi, etc).

Archer intends to launch an Uber-like air taxi service and also sell EV aircraft directly to third-party customers. For example, it recently entered a strategic partnership with Anduril Industries to develop hybrid aircraft for military applications (reconnaissance, for example, given how quiet they are).

Now, the thing here is that the company still hasn’t had its aircraft, called Midnight, fully approved by the Federal Aviation Administration (FAA). It expects to achieve this later in 2025, but there could be regulatory delays (or worse). So this stock’s highly speculative at this stage.

However, there are a few things I like here. First, Archer has nearly completed phase three of the FAA’s four-phase certification process, while making progress through the final stage. And it’s on course to launch a commercial air taxi service in Abu Dhabi later this year.

Next, it has just finished construction of a high-volume, 400,000 sq ft manufacturing facility. With backing from car giant Stellantis, it intends to scale up to 650 aircraft annually by 2030. Archer’s currently well-capitalised and its order book now exceeds $6bn.

Finally, Morgan Stanley estimates the eVTOL market could top $1trn in 15 years! Archer Aviation’s market-cap today is $4.3bn. At $8, I think the stock’s worth considering for adventurous investors.

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Should I buy the dip? Let’s discuss.

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.

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.

My move

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

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.

The post Down 23% in a day but up 148% in 2 months, is this $7 growth stock a buy for me? appeared first on The Motley Fool UK.

Indeed, shares of the electric vehicle (EV) pioneer have jumped 35% in just the past month. Yet that’s not a patch on Archer Aviation (NYSE: ACHR), whose share price is up a whopping 91% in November alone.

I mention this relatively obscure firm because, like a young Tesla, it’s striving to disrupt transportation through electric innovation. However, this late-stage start-up is a minnow by comparison. Its market-cap is a mere $2.5bn versus Tesla’s $1.1trn.

Still, its clearly got some investors excited. So could buying shares of Archer be like investing in Tesla in 2010? Let’s discuss.

What does it do?

Archer Aviation’s developing an electric vertical take-off and landing (eVTOL) aircraft called Midnight for urban travel. In other words, an electric flying taxi that’s quieter and greener than a helicopter.

It’s designed to carry four passengers and a pilot and cruise at speeds of up to 150 mph. The aim is to slash commute times and eliminate traffic bottlenecks in the world’s most congested cities.

For example, Archer plans an air taxi network in Los Angeles that would replace one-to-two-hour drives with 10-to-20-minute flights. It’d be a ride-hailing service similar to Uber.

As well as this, Archer’s selling its aircraft directly to third parties. It recently signed a $500m intended purchase agreement with Japan Airlines, pushing its aircraft order book above $6bn.

The company’s backed by auto giant Stellantis, which is helping to manufacture the Midnight aircraft. 

A new form of transportation

Last month, the Federal Aviation Administration (FAA) approved eVTOLs and brought in a final set of safety rules. This is the first new category of aircraft overseen by the FAA since helicopters were introduced back in the 1940s.

Therefore, this now seems less a question of if but when these flying taxis are ferrying passengers.

But how long exactly? Well, this is where the uncertainty comes in. The company’s still working its way through the aircraft certification process. It’s on course to finish this by early 2026, but there could still be setbacks.

It’s also set to launch commercial air taxi services in the United Arab Emirates as early as Q4 2025. So we’re still at least a year away.

Losing money

Archer’s generating no revenue and posted a $115.3m net loss in Q3. It did end the quarter with $500m in cash though, and could soon receive another $400m from Stellantis. So it has enough cash for now.

However, it plans to ramp production to two aircraft a month by late 2025. Therefore, it’ll almost certainly need to raise more money at some point, potentially diluting shareholders.

The next Tesla?

I hold shares in eVTOL rival Joby Aviation, as I think its partnership with Uber and vertically integrated model might give it a competitive advantage over Archer. Joby stock is up 47% so far in November.

But both shares are very high-risk and far from certain to generate Tesla-esque returns. Another eVTOL start-up, Germany’s Lilium, just went bust.

However, Morgan Stanley sees this urban air travel market reaching $1trn by 2040. Archer offers investors a compelling entry point into this potentially transformative industry.

That said, I believe owning both stocks is too risky, so I’m sticking with Joby for now.

The post Could me buying this stock with a $2.5bn market-cap be like investing in Tesla in 2010? appeared first on The Motley Fool UK.

Market leader

First we have Joby Aviation (NYSE: JOBY), often dubbed the “Uber of the sky“. The shares have doubled year to date, though they’re still down around 35% since they went public in August 2021.

The company has completed 84% of stage-three certification with the Federal Aviation Administration (FAA). This keeps it on course to begin its commercial sky-hailing service in 2025.

Its four-passenger air taxis can fly up to 100 miles on a single charge, with a trip from Manhattan to JFK International Airport taking seven minutes rather than an hour or more by car. With its many existing helipads, New York is set to be one of its first launch markets.

Joby has a partnership with Delta Air Lines and delivered its first electric aircraft ahead of schedule to the US Air Force in September. I’d expect many more orders to come in as organisations aim to decarbonise their operations.

One risk I see here though is the market cap of $4.8bn, which reflects high investor expectations. Any deviation from its commercial timeline and the shares could pull back sharply.

That said, the company had $1.1bn in cash and equivalents at the end of September. So its current cash burn rate could double and it would still have enough capital to last until 2025.

Finally, I note the stock is held by Scottish Mortgage Investment Trust. The managers are excited by Joby’s mission “to save one billion people one hour per day“.

Midnight is upon us

The second eVTOL stock, Archer Aviation (NYSE: ACHR), has more than trebled in 2023.

The company’s first aircraft, Midnight, has 12 small propellers rather than one large rotor, making it nearly 1,000 times quieter than a helicopter. Production is slated to begin in mid-2024.

One thing I like here is the firm’s blue-chip backers, including Boeing, Stellantis and United Airlines. It has raised over $1bn in funding from such investors.

This is a massive endorsement of its technology, given that the likes of Boeing probably know a thing or two about aircraft engineering.

With a market cap of $1.9bn, Archer is smaller than Joby, so may have higher potential to grow fast. However, it also faces the same risk of potential delays to its 2025 commercialisation schedule.

A basket approach

Flying taxis combine the speed of helicopters (up to 200mph) with the near-silent and greener nature of electric vehicles. They’re built for a net-zero world.

Morgan Stanley predicts there will be thousands of them above major cities in future, making this a $1trn (yes, trillion) market by 2040.

This is why I started to pick up shares of both, as well as Lilium, another eVTOL stock, earlier this year.

However, this nascent industry carries many risks, meaning these shares are only suitable as a small part of a well-diversified portfolio.

My plan is to accumulate more shares on dips while continuing to take a three-pronged basket approach.

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