Archer Aviation Fell After Initially Surging Today -- Is the Stock a Buy?

Archer Aviation (NYSE: ACHR) stock lost ground in today's trading despite surging earlier in the session. After having been up as much as 16.4%, the electric flying-taxi company's share price ended the daily session down 1.5%. Meanwhile, the S&P 500 (SNPINDEX: ^GSPC) fell 3%, and the Nasdaq Composite (NASDAQINDEX: ^IXIC) ended the day down 3.6%.

Archer Aviation stock initially saw big gains in today's daily session following bullish coverage from Cantor Fitzgerald. The firm reiterated an overweight rating on the stock, which is equivalent to a buy rating. It also raised its one-year price target on the stock from $10 per share to $13 per share. But Archer wasn't able to hold on to the gains driven by the positive analyst coverage.

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The Federal Reserve announced another 25-basis-point cut for interest rates today -- a move that was widely anticipated. The benchmark interest rate has now been lowered to 4.25%, but comments from Fed chairman Jerome Powell wound up powering a dramatic swell in bearish sentiment. While significant progress has been made on combating inflation, Powell made comments today suggesting that the central banking authority will take a more cautious approach to rate cuts next year.

Is Archer Aviation stock a buy?

The big valuation swing today highlights the volatile nature of Archer Aviation stock. The company is still in a pre-revenue state, and it's still awaiting regulatory approvals that will pave the way for its Midnight flying vehicles to begin operating commercially. With the flying-taxi specialist valued at roughly $3.85 billion despite having never recorded meaningful revenue, it's undoubtedly a high-risk investment play.

On the other hand, Archer Aviation appears to be an early leader in an emerging category with massive long-term potential. The company says that it already has $6 billion worth of customer orders for Midnight vehicles, and it expects to begin commercial flight operations next year.

Even better, Archer recently announced that it was entering the defense industry through a partnership with Anduril -- a defense technologies company focused on innovation. Anduril was founded by Palmer Luckey, who also founded and then sold Oculus to Meta Platforms, and the defense innovator has already had some success winning contracts with the U.S. armed forces. Designing and manufacturing flying electric vehicles for the defense industry has the potential to be a major performance catalyst for Archer.

So while Archer Aviation has a speculative, highly growth-dependent valuation, it has feasible avenues to delivering massive returns for long-term shareholders. For investors who are willing to embrace high levels of risk in pursuit of scoring huge returns, the company has the makings of a worthwhile portfolio addition. Investors should approach a potential investment in the company with the understanding that the stock is likely to be highly volatile, and adopting a dollar-cost-averaging strategy rather than trying to time a large buy all at once could be the right move.

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.