Down More Than 60% From Its High, Is Now the Time to Buy Archer Aviation Stock?

Archer Aviation (NYSE: ACHR) is one of the leading companies in the electric vertical take-off and landing aircraft (eVTOL) market, but investors haven't been all that excited with it of late. Its value has been dropping as rival Joby Aviation has been making headlines with its progress and highly publicized test flights, and its valuation is more than double Archer's.

Neither company has obtained approval for their air taxis just yet, and both contain sizable long-term risks. But with a lower valuation, and Archer's stock down more than 60% from its 52-week high of $14.62, could now be a good time to add it to your portfolio?

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The company expects operations to commence this year

Although Joby's been stealing the spotlight recently, Archer says it has been making significant progress toward obtaining certification from the FAA for its Midnight aircraft, noting that "in April, Archer reached a key milestone on its path to FAA Type Certification of Midnight, becoming the first eVTOL company to close Phase 3 of the FAA's 4-phase Type Certification process."

Certification and obtaining approval are what investors are focused on, as that will dictate how quickly Archer can begin generating revenue. For now, this remains a cash-burning business with limited revenue to show for it, but if it's able to commence operations, as it plans to do later this year, then all that could change. If Archer does obtain certification, the stock could instantly get back up to its recent highs.

Risk is high, but so is the upside when it comes to Archer's stock

At a much lower valuation than Joby, Archer's stock may be in a better position to surge higher if its Midnight aircraft obtains approval from regulators. However, the market is clearly having some doubts, with Archer's stock falling 45% in the past year.

The bigger risk is that even with approval, Archer may continue to experience significant losses and cash burn as it scales its operations. Approval is just one step in its longer-term growth story, and so while that could be a near-term catalyst, it doesn't guarantee that the business will be a success and that the stock is due to rise higher in the long run.

Archer may be a compelling stock to take a small position in, however, given the long-term upside it possesses due to the opportunities in the eVTOL market in the years ahead. But this type of investment, given the uncertainty around the business, is going to primarily be suitable for investors who have many investing years left and who are comfortable with the risk that comes with the stock. If you fall into that category, it may not be a bad idea to buy the stock at its reduced price tag.

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.