Is Archer Aviation Stock Due to Take Off After Aug. 11?

Key Points

• According to analysts, there is loads of growth potential in the eVTOL market in the years ahead.

• Archer's business isn't generating any revenue right now and its losses have been high.

• An update on its business operations, however, could spark a rally.

• 10 stocks we like better than Archer Aviation ›

Archer Aviation (NYSE: ACHR) is an emerging company that's looking to make it big in the world of electric vertical take-off and landing (eVTOL) aircraft. It has big plans for growth and for investors, presenting them with an exciting way to invest in a business that may have a ton of potential to become much more valuable in the years ahead.

Analysts at Grand View Research project that the global eVTOL market will grow at a compound annual rate of 54.9% until the end of the decade. That's mind-boggling growth, and if Archer can be a part of that, there could be significant upside for the stock.

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Shares of Archer have more than doubled in the past 12 months. But year to date, things have cooled -- the stock is only up 3% since January. With earnings around the corner on Aug. 11, could now be a good time to consider buying shares of Archer? Could it be overdue for a big rally?

Image source: Getty Images.

How Archer's stock has done after recent earnings reports

In the past few years, it's been a bit of a mixed bag for Archer's stock performance after earnings. Newsworthy items and announcements, rather than financials, are what tend to move the stock -- especially since the company isn't generating any revenue.

ACHR data by YCharts

What earnings could help with, however, is putting more of a spotlight on this seemingly overlooked stock this year. For all its potential, the excitement around Archer seems to have cooled. And what might give the stock a boost is any positive developments related to its operations and progress it is making toward certification of its Midnight aircraft.

High short interest could make it a volatile holding

One factor to consider when investing in Archer is that its short interest as a percentage of float is high, at around 20%. Although that has come down of late, it signifies that there are still a lot of short sellers and people betting against the company and its ability to succeed in the eVTOL market.

ACHR Percent of Float Short data by YCharts

If the company doesn't provide investors with an encouraging update to suggest that it may be on track for its goal of producing two aircraft per month by the end of the year, or making progress related to Midnight's test flights in Abu Dhabi (which began in July), then that could be the fuel that short sellers need to help drive the stock down lower. On the flip side, if there are positive signs that the business is going in the right direction, then it may result in a short squeeze and the stock taking off in value.

Should you buy Archer stock today?

Archer is a risky stock to invest in, because the company isn't generating any revenue today and it has burned through $377 million over the trailing 12 months, just from its day-to-day operating activities. With more than $1 billion in cash and cash equivalents on its books, it's not in any danger of running out of money anytime soon. But its cash burn will likely accelerate significantly as it ramps up production of its aircraft.

The stock could be a good way to invest in the eVTOL market but this is an investment that may only be suitable to investors with a high risk tolerance. Archer's business, while promising, remains unproven. Given how early the company is in its growth, I don't see any urgency to buy the stock before it posts earnings on Aug. 11, and unless it releases some exciting developments, I wouldn't expect it to soar afterward, either.

However, if you are bullish on the company's future and OK with the risk and uncertainty ahead, you may still be better off investing in Archer sooner rather than later, given that the eVTOL stock does appear to be flying under the radar these days.

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David Jagielski 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.