Investors are infatuated with so-called flying cars. But this Jetsons-like future is still a ways off… and that’s why shares of Archer Aviation (NYSE:ACHR) may be in for a rough patch after the company announced its third-quarter results late Thursday.
Archer, one of the leading developers of electric vertical take-off and landing (eVTOL) aircraft, reported a net loss of $51.6 million and forecast that it would spend between $100 million and $110 million in the fourth quarter. The company has no revenue yet. Archer founder and CEO Adam Goldstein reiterated Thursday that the first commercial launch of its Midnight taxi is expected in 2025. Midnight completed its inaugural test flight late last month.
So, are investors getting prematurely excited about Archer’s prospects? The stock, which fell about 9% in early trading Friday, has skyrocketed more than 160% so far this year.
Archer Aviation Braces for Turbulence
Archer is still a highly speculative company in an extremely competitive and nascent industry. Joby Aviation (NYSE:JOBY), Eve Holding (NYSE:EVEX), Blade Air (NASDAQ:BLDE), China’s EHang (NASDAQ:EH), Germany’s Lilium (NASDAQ:LILM) and the United Kingdom’s Vertical Aerospace (NYSE:EVTL) are just a few of the publicly traded companies competing for investor attention and potential business deals with Archer. The company also has numerous privately held rivals that make drones and other aircraft.
But Archer may have a wing up on the competition. That’s because Archer recently settled litigation with Wisk Aero, a competitor backed by aerospace giant Boeing (NYSE:BA). Archer also announced in August that Boeing was part of a group of firms that contributed to a new $215 million investment in the company. Other backers included Chrysler owner Stellantis (NYSE:STLA), United Airlines (NASDAQ:UAL) and Cathie Wood’s ARK Invest. Including this recent round of financing, Archer has now raised more than $1.1 billion.
This is obviously encouraging news. And it’s also worth noting that Archer also has a contract with the U.S. Air Force that could be worth as much as $142 million. (So far though, Archer has received a mere $1 million of that.) The company also recently inked deals with the Abu Dhabi Investment Office and New Delhi-based travel and hospitality giant InterGlobe Enterprises to launch Midnight air taxi services in the UAE and India in 2026.
Note that date though. 2026. That’s why taking a gamble on Archer in late 2023 is exactly that: a gamble. Any investor buying the stock now has to realize that Archer is more like a late-stage private company that still is dependent on funding rounds from big backers because it is not yet close to generating sales, let alone profits.
The Bottom Line on ACHR Stock
Archer chief operating officer Tom Muniz said in the company’s third quarter letter to shareholders that Archer and the rest of the eVTOL industry are “another step closer to bringing a scalable and commercially viable aircraft to market.”
That’s great news for the company. But given how high the stock has already flown this year, it looks like time for investors in Archer to take some profits.
As of this writing, Paul R. La Monica did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.