Cathie Wood Recently Acquires 5 Million Archer Aviation Shares. Is It Wise to Mirror Her Action as the Share Prices Linger Under $10?
Cathie Wood Recently Acquires 5 Million Archer Aviation Shares. Is It Wise to Mirror Her Action as the Share Prices Linger Under $10?
Cathie Wood, CEO of Ark Invest, is famous for making daring bets. Unlike most money managers who balance their portfolios with a mix of blue chip, growth, and even some speculative stocks, Wood favors investing in riskier opportunities.
One of the stocks that has recently become a regular purchase for Wood is *Archer Aviation* (ACHR -3.08%), a company that manufactures electric air taxis. From October 28 to November 13, Ark Invest acquired 2.5 million shares of Archer.
Less than a month later, on December 13, Wood decided to double down on her Archer investment, buying a huge 5 million shares spread across her ARK Innovation, ARK Autonomous Technology & Robotics, and ARK Space Exploration & Innovation exchange-traded funds (ETFs).
With shares trading below $10, has Wood identified a unique bargain in the electric vehicle (EV) industry? Let's take a closer look at Archer's recent developments to determine if now is the right time to follow Wood's lead and purchase some shares.
Archer has been keeping busy
Since Wood began increasing Ark Invest's Archer stock purchases towards the end of October, the EV company's share price has skyrocketed by 166% as of the market close on December 17.
Here are a few important news items related to Archer that have occurred over the past month, which likely contributed to the stock's surge:
- November 7: Japan Airlines and Japanese conglomerate Sumitomo recently founded a joint venture called Soracle Corporation. As part of this venture, Soracle is developing an advanced air mobility plan to alleviate transportation pressures in densely populated areas by offering EV air taxi flights as an alternative mode of transportation. Soracle has chosen Archer to help with this project, placing an order for 100 Archer Midnight aircraft – an estimated $500 million deal.
- November 19: Boutique investment bank Needham began covering Archer stock on November 19 and assigned a buy rating to the stock with a projected price target of $11.
- December 12: Archer announced an important partnership with Anduril – a company that's making strides in developing autonomous solutions for military operations. Along with this news, Archer revealed that it had secured $430 million in equity financing from existing partners Stellantis and United Airlines to help fund its growth in the defense sector.
While all of these developments are exciting for Archer, some of the potential from these deals may already be priced into the stock due to its significant increase over the past month. However, with such a promising future ahead, there's still a lot to explore before making a definitive decision on whether now is the right time to buy Archer stock.
Is Archer Aviation stock a good investment?
There's no denying that Archer's electric taxis have garnered a lot of attention, with applications ranging from traditional commercial uses to the U.S. military.
However, it's crucial to remember that Archer is still in its early stages and has yet to generate any revenue. Until revenue starts rolling in, Archer will remain an expensive stock, considering its high cash burn.
To be honest, I believe Wood was quite fortunate with Archer. When she was purchasing the stock in late October, it was likely aimed at reducing Ark Invest's cost basis, given its low share price. And while I can only speculate, I have to believe that Ark Invest's massive December 13 purchase was influenced by the Anduril partnership and new equity financing – thus providing Archer with some breathing room and alleviating liquidity pressures until it begins commercial operations.
In many ways, I see Archer as a rising athlete who's being compared to Michael Jordan before they've even stepped onto the professional court. While these comparisons make for good stories, there's still a lot of speculation involved. An investment in Archer is only suitable for those who are comfortable with volatility, uncertainty, and the unknown.
- Cathie Wood's investment strategy at Ark Invest, which often includes riskier opportunities in the finance sector, resulted in a significant purchase of Archer Aviation's shares, as they see potential in the electric vehicle industry.
- With Cathie Wood's recent investments in Archer Aviation, the finance world is closely watching the company's progress, as they aim to revolutionize air transportation with their electric air taxis, with partnerships with major players like Japan Airlines and Sumitomo.