Down More Than 55% From Its High, Is Archer Aviation Stock in Trouble?

Excitement looks to have cooled when it comes to risky growth stocks, particularly those that still have unproven business models. Archer Aviation (NYSE: ACHR) is a great example of that, as its stock price has declined 23% over the past six months. Shares of the electric vertical takeoff and landing (eVTOL) company reached a high of $14.62 in October, but they're now down around 55% from that level.

It could be a while before the company starts generating revenue, and meanwhile, its losses are piling up. Is Archer's stock in danger of going even lower, or could this be a good growth stock to add to your portfolio today, at a significantly reduced price?

Image source: Getty Images.

Archer expects to begin carrying passengers this year

It's been a painstaking process for investors to wait for Archer to obtain certification and commence its air taxi services, but 2026 could indeed be the year it finally happens. The company says it's targeting this year as to when its Midnight aircraft will begin carrying passengers. It'll be a huge milestone for the business, which, if it goes smoothly, could attract a lot of attention to the eVTOL stock.

It will, however, likely take even longer before the company generates any meaningful revenue. Last year, the company's operating expenses totaled $730 million, an increase of 43% from the previous year, as the company ramped up its production efforts. And its costs will likely only rise higher in the years ahead, as it looks to scale its operations.

Is investing in Archer stock a good move today?

Archer's growth opportunities are enticing as it's one of the early leaders in the eVTOL space. The global market is expected to experience tremendous growth in the years ahead. Analysts at Grand View Research project that it will grow at a compounded annual growth rate of 54.9% until the end of the decade. If Archer can capitalize on those growth opportunities, it could end up being a red-hot growth stock to own.

There is, however, no shortage of challenges and obstacles ahead. Even if the company generates a ton of revenue, that may not necessarily translate into profit anytime soon. And with valuations of eVTOL stocks already being fairly significant (Archer has a market cap of just under $5 billion while rival Joby Aviation is worth close to $10 billion), the danger is that there may still be too much bullishness priced into these stocks.

Investors may be better off waiting when it comes to Archer's stock, as right now, there's still plenty of risk here. Until the company starts transporting people on its Midnight aircraft and there's a clearer picture of what its financials might look like in the future, I'd steer clear of the stock as it's likely to remain volatile for the foreseeable future.

David Jagielski, CPA 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.