Over the last couple of years, a new pocket of the electric vehicle (EV) realm has started gaining momentum in the investment world. Known as electric vertical takeoff and landing (eVTOL) aircraft, they have sparked some excitement among technologists and EV enthusiasts.
One leading eVTOL company you may be familiar with is Archer Aviation (NYSE: ACHR). As of this writing (April 4), shares of Archer have dropped by 36% on the year and are currently trading just over $6. Is this an opportunity to buy the dip in Archer Aviation stock?
While electric air taxis are not yet a mainstream method of transportation, Archer has managed to strike a number of interesting partnerships that have some investors intrigued about the company’s future.
When it comes to financial backing, Archer has the support of both Stellantis and United Airlines. In addition, the company has also partnered with Southwest Airlines, Ethiopian Airlines, and many more to deploy its aircraft and help commercial airlines build fleets of eVTOLs.
Moreover, Archer has received interest in the defense sector as well — from the U.S. military and autonomous systems developer Anduril. Lastly, the company is even deploying AI software from Palantir Technologies to help identify more efficient processes when it comes to manufacturing and scaling.
Given the multitude of applications for eVTOL in combination with Archer’s global appeal, there is reason to believe that the company has an enormous addressable market that includes commercial aviation, defense contracting, and even AI.
With that said, there is more to explore about Archer before pouncing on the current dip in the company’s stock price. Although shares of Archer currently hover just over $6, that doesn’t tell us much about the company’s actual value. Right now, Archer’s market capitalization is roughly $3.7 billion. In order to figure out if this is a good deal or not, let’s take a look at Archer’s current financial profile.
Over the last few years, Archer has done a respectable job maintaining a fairly disciplined approach to its cost structure. However, net losses are steepening while the company’s cash balance is rising. How can that be?
Archer is a pre-revenue business, and so the company doesn’t actually have any sales coming through the door yet. In order to invest in research and development (R&D), engineering, marketing, etc., the company has relied on Stellantis and other strategic investors to bridge the gap between building scale and actually achieving widespread commercialization.
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