Should You Buy Archer Aviation While It's Below $10?

One of the most popular non-artificial intelligence (AI) stocks among growth investors is Archer Aviation (NYSE: ACHR). Archer manufactures electric vertical takeoff and landing aircraft (eVTOL). Basically, the company is trying to upend the mobility industry through the introduction of electric air taxis.

As of this writing, shares of Archer trade at "just" $7. Let's dig into the company's addressable market and assess what makes the stock so intriguing to investors. From there, we'll take a look at Archer's valuation profile to help assess if the stock is a no-brainer buy right now.

Image source: Archer Aviation.

Will Archer Aviation finally transition from concept to a commercial business this year?

It's not just Archer's technology that has investors excited. For years, the company has been involved in a number of strategic discussions alongside commercial airliners, the U.S. military, and even leading tech giants like Nvidia and Palantir Technologies -- all of which see practical use cases for Archer's aircraft.

Given its potential applications in traditional aviation, defense operations, and even AI, it's not entirely surprising that Wall Street sees massive upside for Archer. Morgan Stanley estimates that the low-altitude market -- drones and eVTOLs -- could reach $9 trillion over the coming decades.

While Archer's ability to attract big tech and the military is exciting, the company hasn't made a ton of progress penetrating its multitrillion-dollar opportunity. In fact, Archer remains a pre-revenue business. However, some analysts forecast Archer will finally begin generating sales later this year.

What makes Archer Aviation stock move?

Given its lack of revenue growth, smart investors are wondering what factors influence Archer's stock price. The answer is simple: narratives.

Every time Archer announces another collaboration with a commercial airliner or partners with a high-profile tech company, retail investors and day traders pour into the stock. The company's PR is often mistaken as actual progress or business execution; hence, fleeting positivity often fuels aggressive upward jolts in Archer's share price.

As a result, Archer's volatility has become a vessel for swing trading as opposed to being a cornerstone of institutional portfolios.

Is investing in Archer Aviation worth the risk?

Given Archer's lack of measurable sales, its valuation is tough to assess.

The last time the company published details on its order book was back in 2024, when management signaled Archer had more than $6 billion in backlog. Using this figure as a proxy for revenue, Archer stock might look reasonable, given its market capitalization is only $5.3 billion.

Where things become nuanced is when you begin to question the likelihood of all of this revenue actually being recognized. And even if all of this cash does come through Archer's doors, what sort of timeline are investors looking at in terms of aircraft delivery and order payment?

My point to all of this is that investing in Archer feels more aligned with owning equity in a speculative start-up rather than a durable business with predictable cash flow.

Against this backdrop, I think Archer's stock forecast is likely to drop much lower before it potentially soars to new highs. For these reasons, I'd pass on owning Archer stock at the moment.

Adam Spatacco has positions in Nvidia and Palantir Technologies. The Motley Fool has positions in and recommends Nvidia and Palantir Technologies. The Motley Fool has a disclosure policy.