Archer Aviation (ACHR) fell as much as 20% on Nov. 7 after the eVTOL company reported a strong enough third quarter but announced a $126 million acquisition of Hawthorne Airport.
ACHR plans to use the Los Angeles-area airport as a strategic hub for its air taxi operations and artificial intelligence (AI) testing.
At its intraday low, Archer Aviation shares were seen trading nearly 50% below its year-to-date high.
ACHR stock plummeted this morning primarily because the company plans to finance its deal with Hawthorne with a $650 million stock offering.
On Friday, the air taxi company issued 81.25 million new shares, eroding its earnings per share (EPS) and raising dilution concerns.
Investors fear future earnings will be spread thinner, weakening upside potential and putting pressure on valuation multiples. Additionally, there is also notable execution risk associated with the Hawthorne acquisition.
Still, celebrity investor Cathie Wood remains bullish on Archer Aviation stock, seeing this morning’s pullback as an opportunity to pick up a quality name at a deep discount.
Cathie Wood, founder and CEO of Ark Invest, took advantage of ACHR’s sell-off to increase her exposure to the NYSE-listed urban air mobility specialist.
On Thursday, Wood spent another $26 million to buy more than 3 million shares of Archer Aviation for three of his flagship exchange-traded funds (ETFs).
His allocation indicates unwavering confidence in the company’s long-term potential despite near-term volatility and dilution risk.
Note that ACHR stock has historically (over the past four years) returned nearly 39% on average in November, which also makes a strong argument to buy it on the November 7 dip.
Wall Street analysts remain bullish on Archer Aviation stock, especially as the eVTOL company is rapidly improving its fundamentals, as evidenced by its earnings release released today.
According to Barchart, the consensus rating on ACHR stock remains at “Moderate Buy” with an average target of around $12.50, indicating upside potential of around 70% from current levels.