Why Archer Aviation Stock Took Flight on Tuesday
Key Points
Cathie Wood has been scooping up shares of Archer Aviation.
Several of Ark Invest's flagship funds bought more than 1 million shares in all yesterday, worth more than $4.5 million.
The news comes on the heels of Archer's big announcement last week, but it still has regulatory hurdles to clear.
Shares of Archer Aviation (NYSE:ACHR) charged sharply higher Tuesday morning, gaining as much as 9.6%. By the time the market closed, the stock was still up 7.4%.
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The catalyst that sent the electric vertical takeoff-and-landing (eVTOL) aircraft specialist higher was news of opportunistic buying by a prominent name on Wall Street.
Image source: Archer Aviation.
Cathie Wood hits buy
Reports emerged this week that Cathie Wood, CEO of Ark Investment Management, has been scooping up shares of Archer Aviation. ARK Autonomous Technology & Robotics fund added 781,854 shares on Monday, while ARK Space Exploration & Innovation fund purchased 379,750. In all, ARK scooped up more than 1 million shares yesterday, worth nearly $4.6 million as of Monday's closing price.
Archer unveiled plans last week to establish air taxi networks across Houston, Dallas-Fort Worth, and Austin. The goal of this venture is to give commuters in "America's fastest-growing megaregion a way to skip traffic and turn hour-long drives into 10- to 20-minute flights on its all-electric Midnight air taxi." By connecting major airports to associated business districts and coastal destinations, Archer is tapping into a desire to avoid traffic, saving users time and money.
To be clear, Archer will require a sign-off from the Federal Aviation Administration (FAA) for its Midnight air taxi, which is working its way through the final stages of the process. The company won't generate any revenue from its proposed air taxi business until regulatory approval has been granted.
Change is coming. Archer's recent deal with Boeing will expand its potential and add much-needed revenue to the mix, though the company will likely remain unprofitable for the foreseeable future.
As such, Archer Aviation stock has shed nearly 63% of its value over the past year as investors weigh the high-risk, high-reward nature of owning shares.
Danny Vena, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Boeing. The Motley Fool has a disclosure policy.