Why Archer Aviation Stock Plummeted Last Month But Is Gaining in July
Key Points
Concerns about rising interest rates prompted big sell-offs for Archer Aviation last month.
The stock is rebounding this month amid some potentially promising news for the eVTOL industry.
Archer Aviation (NYSE: ACHR) stock got hit with a huge pullback last month. The company's share price fell 30.5% over the period, according to data from S&P Global Market Intelligence. Meanwhile, the S&P 500 declined 1.1% in June, and the Nasdaq Composite fell 2.8%.
While there was little in the way of fresh, business-specific news driving the pullback, the stock saw a massive valuation decline as investors moved out of speculative growth stocks. As of this writing, the stock is now down roughly 47% over the last year.
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Archer Aviation stock got crushed in June despite little news
June was a slow news month for Archer Aviation, which makes the stock's huge valuation decline in the month somewhat surprising. On the other hand, there were some macroeconomic catalysts that explain the big pullback.
For starters, investors broadly became more convinced that a move from the Federal Reserve to cut interest rates probably isn't coming any time soon -- and more concerned that the Fed could move to hike rates. The U.S. central banking authority uses rate increases to combat inflation, and accelerating inflation connected to rising energy prices due to the Iran war had investors worried last month that rate increases could arrive this year. That could be trouble for Archer stock.
Even after big sell-offs, Archer Aviation has a market capitalization of roughly $4.1 billion. Meanwhile, the company is valued at approximately 430 times this year's expected sales. Highly growth-dependent stocks tend to perform much better in low-interest rate environments, and they can get hit with huge pullbacks when rates start to rise.
Archer has regained some ground early in July
Archer Aviation stock has seen bullish momentum early in July's trading, with the stock up more than 9% in the month as of this writing. Meanwhile, the S&P 500 is up 0.7%, and the Nasdaq Composite is up roughly 0.3%.
In addition to bullish support for the broader market, Archer stock has climbed higher in conjunction with electric vertical take-off and landing (eVTOL) industry news. On June 30, Joby Aviation announced that it had entered a new joint venture with Toyota to advance manufacturing capabilities for eVTOL aircraft.
While Joby is arguably Archer's biggest competitor, investors appear to view the new partnership as a positive indicator for the broader eVTOL industry. Archer has a similar partnership with Stellantis, and the team-up between Joby and Toyota seems to have investors feeling more bullish about auto manufacturers helping leading eVTOL players eventually reach profitability.
Keith Noonan has no position in any of the stocks mentioned. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.