Why Archer Aviation Stock Took a Dive on Tuesday

Shares of Archer Aviation (NYSE:ACHR) slumped out of the gate Tuesday morning, tumbling as much as 9.8%. As of 11:45 a.m. ET, the stock was still down 5.1%.

The catalyst that sent the electric vertical takeoff-and-landing (eVTOL) aircraft specialist lower was the company's financial results, which failed to inspire investors.

Image source: Archer Aviation.

Cash burn continues

For the third quarter, Archer generated revenue of $5.1 million, edging slightly higher from $5 million in Q2 and up from no sales in the year-ago quarter. Operating expenses of $294.3 million jumped 68% year over year, resulting in a loss per share of $0.35.

For context, analysts' consensus estimates called for revenue of $3.57 million and a loss per share of $0.34, so the results were mixed compared to Wall Street's expectations.

Another area of investor focus was Archer's cash burn, as its cash flow from operations was negative $470.1 million. However, the company ended the quarter with cash and equivalents of $1.4 billion, providing a cushion as it continues to ramp up its operations.

On the operational front, management noted that Archer's Midnight aircraft recently received a Market Survey Special Airworthiness Certificate from the Federal Aviation Administration (FAA), which will allow the company to begin piloted operations as part of the government's eVTOL Integration Pilot Program (eIPP) and Archer's plans to carry passengers during the LA 28 Olympic Games.

Archer also reported that its acquisition of Boeing's Wisk Aero, SkyGrid, and Insitu businesses is nearing completion, which will accelerate the company's goal of becoming an end-to-end diversified aerospace and defense platform and increase its revenue-generation capabilities.

To be clear, Archer is still working through Phase 4 and still requires final certification from the FAA for its Midnight air taxi, a process that is ongoing. As such, the company won't generate significant revenue from its proposed air taxi business until regulatory approval has been granted.

Archer Aviation isn't yet profitable, with several regulatory hurdles remaining. As such, the stock is a high-risk, high-reward proposition that has shed 44% of its value over the past year. As such, investors should make the eVTOL aircraft specialist a small part of a balanced portfolio.

Danny Vena, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Boeing. The Motley Fool has a disclosure policy.