Archer Aviation: Buy, Sell, or Hold?

Archer Aviation (NYSE: ACHR) has been endeavoring to make traffic jams obsolete; in the meantime, its stock appears to be stuck in one.

The electric aircraft maker has spent many years promising investors one thing: an electric air taxi network. It has spent millions developing Midnight, its flagship electric vertical takeoff and landing (eVTOL), and will likely spend millions and millions more before that same craft is FAA-certified -- assuming that day comes.

Meanwhile, investors have been getting restless: The stock, once trading above $14, has crashed over 62% to about $5.50 today. It has not traded above $8 since late January, despite many exciting updates and a small amount of revenue last quarter.

The seeming disconnect between what Archer wants to be -- a company capitalizing on a multitrillion-dollar urban mobility market -- and what it is (a cash-burning start-up without a cash-generating bird in the sky) begs the question: Should you dump Archer shares, or wait? Likewise, should you buy if you haven't?

The bull case for Archer is growing

Archer has many of the ingredients that constitute great companies -- or great growth stocks.

It has Midnight, its eVTOL, an aircraft that can seat four passengers (plus a pilot). It has a 400,000-square-foot manufacturing factory in Covington, Georgia, conveniently located next to the Covington Municipal Airport. There, it plans to scale up to 650 aircraft a year by 2030 and expand the facility to support 2,300 aircraft a year.

Image source: Archer Aviation.

It doesn't have FAA-type certification for Midnight, but it isn't dilly-dallying: It's currently in the last of the four stages in the FAA's four-phase process. Better still, Archer plans to launch limited operations in American cities in late 2026 under the White House's eVTOL Integration Pilot Program (eIPP). It also plans to launch passenger services outside the U.S., including Indonesia, South Korea, Japan, Ethiopia, India, Serbia, and the United Arab Emirates.

More recently, Archer flexed its commercial and defense muscles. Through its relationship with Anduril, it has co-created an autonomous VTOL platform, with two variants -- Thunder and Halo -- announced. Both Halo and Thunder could be vital to Archer's survival, as defense contracts could provide meaningful revenue while it waits for the FAA's commercial green light for Midnight.

Finally, Archer's balance sheet carries very little debt, and it had about $1.6 billion in cash, equivalents, and investments at the end of June.

Archer's biggest problem? Numbers

One chart can sum up Wall Street's hesitations over Archer right now.

Data by YCharts

What you're looking at is Archer's problem in miniature: widening losses, minimal revenue, and a rapidly growing share count. Archer isn't broke per se -- it can survive for at least two years on its current cash pile -- but research and production will likely require a fresh cash injection at some point, thereby diluting existing shareholders' shares even further.

But the future for Archer looks challenging, not bleak. It has a lot to prove, and that's why the stock has potential -- getting in early, staying invested, and refusing to sell during hard months could prove extremely fruitful over the next five years.

I would not, therefore, sell Archer just yet; I would hold on, as the runway for this company could be unconventionally long.

Steven Porrello has positions in Archer Aviation. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.