Archer Aviation Crashed Today -- Is It Time to Buy the Stock Right Now?

Archer Aviation (NYSE: ACHR) stock plummeted in Monday's trading. The flying-taxi company's share price closed out the daily session down 23.7% and had been down as much as 28.7% earlier in the day. For comparison, the S&P 500 (SNPINDEX: ^GSPC) and Nasdaq Composite (NASDAQINDEX: ^IXIC) closed out the day up 0.2% and 0.9%, respectively.

Archer Aviation faced bearish pressures along multiple lines today. For starters, short-sellers have started to place more bets against the stock on the heels of an explosive rally. Despite today's pullback, the stock is up 122% over the last month.

The resignation of Stellantis CEO Carlos Tavares may have also played a role in today's sell-off. Stellantis has been a significant investor in Archer Aviation, and it's possible investors are concerned that the automaker's next CEO won't be a similarly eager partner. Along similar lines, some investors also appear to be concerned that Archer will move to raise funds by selling more stock soon.

Down almost 24% in one day, is it time to buy Archer stock?

Despite today's precipitous pullback, it's not clear that anything has materially changed for the company's outlook. The change of leadership at Stellantis could potentially limit future funding opportunities through the company, but it's also not clear that will happen.

Whether it's to Stellantis or any number of other potential investors, Archer will likely move to sell more shares to raise funds at some point in the not-too-distant future. The company is still in a pre-revenue state, and it's in the early phases of ramping up manufacturing and getting its Midnight flying vehicles commercialized. There's a very good chance that the stock will see some significant dilution as the company raises funds to scale the business, and long-term investors shouldn't view that as an indication of weakness.

Similarly, an increase of bets against the stock from short-sellers could pressure the stock in the near term -- but it won't define Archer's long-term stock performance. An increase in short interest could also open the door for a potential short squeeze if the company gets favorable news on the regulatory front, or lands new partnerships and contracts.

Proceed with caution

Investors should move forward with the understanding that Archer Aviation is a high-risk, high-reward stock. For those without high risk tolerance, making a substantial investment in the company is probably inadvisable. The company's outlook is highly speculative, and the flying-vehicle specialist could see dramatic valuation contraction if macroeconomic conditions or other factors cause the market to pivot away from growth stocks.

On the other hand, Archer Aviation has been showing some impressive business momentum and could see significant regulatory wins in the near future. For investors who aren't deterred by the stock's high-risk profile, treating today's pullback as a buying opportunity in a broader dollar-cost-averaging strategy could be a good move.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.