Archer Aviation Skyrocketed Today. Is the Stock a Buy Right Now?

Key Points

• Archer Aviation stock saw double-digit gains in Thursday's trading amid bullish momentum for the broader market.

• Speculative growth stocks saw especially strong gains today, and Archer continued to get a boost from some favorable indicators in the eVTOL space.

• Archer Aviation stock probably isn't a good fit for investors without high risk tolerance, but the company could be in the early stages of a big long-term growth story.

• 10 stocks we like better than Archer Aviation ›

Archer Aviation (NYSE: ACHR) stock posted big gains in Thursday's trading. The company's share price climbed 10.8% in the daily session. Meanwhile, the S&P 500 index was up 0.5%, and the Nasdaq Composite was up 0.7%.

Archer Aviation is gaining ground today thanks to bullish momentum for the broader market and especially strong valuation tailwinds for speculative tech stocks. While there isn't any fresh business-specific news for the company, its stock appears to be getting a boost from recent news that Joby Aviation will be significantly expanding production for its electric vertical takeoff and landing (eVTOL) aircraft. Archer's valuation has also continued to benefit from expectations that the Federal Reserve will serve up multiple interest rate cuts this year.

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Is Archer Aviation stock a buy right now?

Archer Aviation now has a market capitalization of roughly $7.4 billion despite the business being expected to post relatively little revenue this year. The company is trading at roughly 581 times its expected revenue for this year. The business's sales could scale rapidly further out, but there's still a huge amount of speculation involved in charting its trajectory.

Archer Aviation is a high-risk, high-reward stock. While the company has recently seen some big valuation gains in conjunction with favorable developments on macroeconomic fronts and indications that the eVTOL industry could be poised to take off, investors must move forward with the understanding that the company's stock could see big downside volatility if economic and industry-specific backdrops take a turn for the worse.

Archer has seen a big valuation outlook, but its performance outlook remains heavily speculative. In addition to its growth opportunities in the commercial air-taxi space, Archer also has expansion potential in the defense industry. Wins on these fronts could power more big gains for the stock, but the company probably isn't a good fit for investors without a high tolerance for risk.

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