Archer Aviation Trades Near $5. Could a $5,000 Investment Set You Up for Life?
Key Points
Archer is spending aggressively on certification work and manufacturing.
The company still needs to prove an important milestone before its eVTOL dreams become credible.
Consider this: $14.62 is about the price of a decent lunch, or, if you're at the airport, barely enough for a sandwich. It also happens to be Archer Aviation's (NYSE: ACHR) 52-week stock price high.
Archer now trades for about $5 a share. If you had invested $5,000 in Archer at its high, you'd be looking at about $1,837 today. And if you invest $5,000 in Archer at today's price, there's a chance you'll be looking at a similarly disappointing result.
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Archer, like Joby Aviation, is stuck between a rock and a hard place. It needs to spend aggressively to get its business up and running; at the same time, spending gobs of cash on manufacturing, infrastructure, and certification work has also been testing investors' patience.
In Q2, Archer generated $5 million in revenue. In the same quarter, its cash pile dropped about $215 million. Its net loss was $262 million, which was softened by $14 million of interest income earned on its cash. At this point, Archer is earning three times as much interest income as revenue.
Three years from now, Archer is predicted to generate half a billion dollars in revenue. If today's spending continued, even that enormous leap in revenue wouldn't be enough to plug its cash-burning hole.
Data by YCharts
One bright spot for Archer is its recent acquisition of Insitu from Boeing. Insitu's business is already profitable and generates more than $200 million in annual revenue. Assuming the acquisition closes, it would give Archer a strong revenue stream immediately.
However, given the uncertainty around Archer's eVTOL business, I can't say the stock will set you up for life. If the eVTOL business is successful, Archer could become a ten-bagger. However, I still need to see a piloted transition of its Midnight eVTOL before I can feel confident about its passenger air taxi business.
For now, I would wait for more concrete progress before you buy Archer. The eVTOL industry has multitrillion-dollar potential, but that doesn't mean every business within it will make you a millionaire.
Steven Porrello has positions in Archer Aviation and Joby Aviation. The Motley Fool has positions in and recommends Boeing. The Motley Fool has a disclosure policy.