Archer Aviation's (ACHR -14.79%) stock hasn't had a particularly good year, with the shares trading near their 52-week lows. But if the second-quarter earnings release is any indication, it is achieving some important progress as it looks to develop an air taxi and air taxi services. Here's a look at the buy, sell, and hold thinking on Archer Aviation.
Buy Archer Aviation
When Archer Aviation reported second-quarter earnings, it provided a long list of recent, and important, achievements. For example, it has solidified its manufacturing agreement with Stellantis (STLA -4.40%). It raised $230 million in cash via equity sales. It delivered its first Midnight aircraft to the U.S. military. And it expanded its backlog by 116 aircraft, worth up to $580 million, bringing the total backlog up to roughly $6 billion.
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The FAA finalized the airworthiness criteria for the Midnight aircraft, which will give Archer Aviation a roadmap to final approval. The FAA also certified the company to operate an airline. And the company has begun to set up an air taxi network in California.
That's not the entire list of positives, either, which speaks to a company that is executing well toward its long-term goal of not only creating a novel air taxi aircraft, but also of offering its own air taxi services. What once may have seemed like a far-off goal now looks like it is starting to get very close.
In fact, Archer Aviation is ramping up to deliver as many as 10 Midnight aircraft to international markets in 2025. In 2026 that number could jump to 48, with a goal of as many as 252 in 2027 as the company looks to serve both U.S. and foreign markets.
If you are a glass-half-full investor, Archer Aviation seems to be on the cusp of a fully developed business. That's a good reason to buy it, though still only for more aggressive investors.
Hold Archer Aviation
That said, Archer Aviation stock has lost nearly half of its value so far in 2024. And it has dropped by about two-thirds since its merger with a special purpose acquisition corporation (SPAC) in September 2021. A lot of investors are probably sitting on sizable capital losses. If you sold, you could use those losses to offset gains elsewhere in your portfolio. This is a portfolio-level view, but one that investors should consider.
However, if tax loss harvesting isn't an issue for you, you should probably stick around. Why sell a company that looks like it is making very real progress toward its goals? That would be like dropping out of a marathon just as you caught sight of the finish line.
Sell Archer Aviation
Tax loss harvesting was mentioned, but the real question here is why some investors might want to simply avoid Archer Aviation, effectively deciding to not buy it.
The answer is the glass-half-empty view, since the company still doesn't have an FAA-approved aircraft to sell. It still doesn't have production ramped up so that it can sell its Midnight aircraft in any material numbers. And above all, it is still spending lots of money and will continue to do so for many years.
Not shockingly, as an upstart aircraft manufacturer and airline, Archer Aviation lost $106.9 million in the second quarter of 2024. The red ink is highly likely to continue flowing, given the money the company has to spend to build out its business. If you are a conservative investor, buying a company that is losing money, doesn't actually have a product it can sell yet, and still has to build out its manufacturing infrastructure is probably a bad idea.
Archer Aviation is making exciting progress
All in, Archer Aviation is moving solidly toward its goals. That's impressive, given that the goals here are pretty audacious. But it still hasn't reached those goals, and it will take a lot of money, and perhaps time, to eventually do that.
Aggressive investors who are willing to ride with what is still a risky company might be willing to buy or hold the stock, recognizing that there is still the possibility of some notable zigs and zags along the way. But conservative investors should probably wait for Archer Aviation to reach a few more milestones (perhaps achieving FAA approval) before stepping aboard.
