Archer Aviation Has Fallen 50% and Could Be a Long-Term Buying Opportunity

Archer Aviation (NYSE: ACHR) is one of several companies looking to build a business around electric vertical takeoff and landing (eVTOL) aircraft. The stock was hot not too long ago, but has since cooled off dramatically as it is taking longer than Wall Street would like for the company to get off the ground. But it is making progress, and the stock's 50% pullback over the past year could be a buying opportunity for long-term investors.

How bad is Archer's drawdown?

Archer Aviation is a money-losing start-up, so it shouldn't be shocking that the stock is risky. In fact, only the most aggressive investors should probably even consider buying it. The volatility you are taking on by owning it has been on clear display over the past year, with the stock down around 50% over that span. That said, that pullback comes after a huge rally in late 2024, when eVTOL stocks were particularly popular on Wall Street. At one point, over the past three years, the stock was up 200%; now it is up just 15% over that span thanks to the current drawdown.

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Given Archer Aviation's still-early stage of development, it is hard to predict what the business is capable of in the long term. However, eVTOL aircraft are expected to be a revolutionary development in the aerospace industry. To simplify the concept, they are expected to be air taxis that quickly carry people and packages over short distances.

There could be more opportunities than there appear to be

The big story for Archer Aviation has been building a global air taxi business that carries people from place to place. Notably, it would allow customers to fly over traffic-congested cities. Civilian use is great, but it is highly regulated. It is taking longer than planned to obtain all the required approvals for the company's Midnight aircraft. The company is slowly moving forward, but Wall Street is clearly tired of waiting.

That said, the company is also working on military uses for its eVTOL technology. That doesn't require the same approvals and could open up a quicker path to revenues and profits. Archer Aviation's stock jumped after it showed off technology it created with military supplier Anduril, which it calls Thunder. Military applications could be the company's first substantial revenue opportunity, but this same technology also has many industrial applications.

Execution will be vital for Archer's success

It isn't easy to build an entirely new aircraft. Still, Archer Aviation is making steady progress, and it looks highly likely that it will eventually get its business off the ground. If you are a long-term investor and can handle owning a volatile stock, the massive price decline in the shares could be a second chance to jump aboard. Archer will need to execute extremely well, but given the recent development on the military side of the business, it is clearly doing just that (even if the process is taking longer than mercurial investors had hoped).

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.