Should You Invest in ACHR Stock Now?

Stock Market

Archer Aviation’s (NYSE:ACHR) stock has surged over the past six months, doubling in price since March, thanks to growing interest in flying car stocks. However, it has also attracted a significant number of short sellers and faced criticism. Despite the skepticism, it’s not just “hope and hype” driving the bullish sentiment, and the short side might not be entirely accurate.

Here’s a closer look into why investing in ACHR stock could be a smart move.

Recent ACHR News

The U.S. Air Force has initiated a contract with electric vertical take off and landing (eVTOL aircraft) manufacturer Archer Aviation, sending them an initial payment of nearly $1 million. This marks the beginning of an agreement potentially worth up to $142 million. In exchange, Archer provided the Air Force with a mobile flight simulator, as outlined in the contract.

This transaction signifies the start of Archer’s partnership with AFWERX, the Air Force’s innovation branch, and its vertical lift division, Agility Prime. This collaboration will lead to flight testing of Archer’s Midnight eVTOL with Air Force pilots. Initially, Archer will deliver up to six aircraft to an undisclosed Air Force Base, with further details pending. The initial payment kickstarts this process.

Additionally, Archer plans to commence passenger transport for up to four passengers, alongside a pilot, through United Airlines in 2025. Initial routes will connect O’Hare International Airport (KORD) in Chicago and Newark Liberty International Airport (KEWR) in New Jersey (near Downtown Manhattan). Archer’s CEO, Adam Goldstein, emphasizes the significance of their eVTOL technology for U.S. aviation and praises the swift progress of their contract with the U.S. Air Force, highlighting the Department of Defense’s commitment to transformative technology.

The Bearish View

Fintel reports a substantial 21.2% of Archer Aviation’s available shares have been sold short, indicating a crowded short position. Short interest remained relatively low until August when it surged, coinciding with Grizzly Research’s critical “short report” on ACHR stock, published on Aug. 15. The report accused Archer of making misleading statements, particularly regarding a significant contract win from the U.S. Department of Defense.

Interestingly, the Grizzly report initially had little impact on the stock but has recently caused a drop of around 18.5%. This is due to a class-action lawsuit filed against Archer, primarily based on the Grizzly report’s allegations.

The stock’s recent downturn isn’t just due to shareholder litigation. The expectation of prolonged high-interest rates may also be affecting it, similar to other speculative growth stocks. While this isn’t the sole reason for Archer’s poor performance, it might give investors pause coupled with the significant short interest.

However, it’s premature to assume that skeptics have dismantled the bullish case, leading to long-term steep declines in shares.

What to Do With Archer Stock Now

Archer has strong backers, regulatory clarity, a prototype, and a manufacturing plan. Analysts recommend buying, but revenue is absent. Scaling by 2028 requires substantial investment. Five Tipranks analysts cover Archer; four advise buying with an $8 price target, not far from August’s high.

While there’s significant short interest, buying this stock solely for a short squeeze is risky. Positive news could spike the price, but until then, it may face downward pressure.

On the date of publication, Chris MacDonald did not have (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 Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.