Why Archer Aviation Stock Is Sinking Today

Archer Aviation (NYSE: ACHR) stock is moving lower in Monday's trading. The flying electric vehicle (EV) company's share price was down 8.3% as of 2:45 p.m. ET. Meanwhile, the S&P 500 index and the Nasdaq Composite index were both down 0.8%.

Monday is the second-to-last day of trading in 2024, and many investors are selling stocks to book profits or take advantage of tax-loss harvesting opportunities. Speculative stocks that have experienced explosive gains recently are seeing particularly large sell-offs in the session, and Archer Aviation falls into that category.

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Cooling off after a hot year

Archer Aviation stock has been volatile in 2024, but overall, it has posted strong gains. Even with its significant pullback Monday, the share price is up 67.5% year to date.

Its performance over the last three months has been even more impressive, up roughly 255%. With such explosive gains in the rear-view mirror, some investors are acting to take profits before the year is over -- and that's putting downward pressure on the share price. The company's incredible rally may also be spurring an increase in short interest, but betting against Archer looks like a risky move right now.

What comes next for Archer Aviation?

The maker of small electric vertical takeoff and landing (eVTOL) aircraft is still a pre-revenue business, which makes valuing it on fundamentals a difficult task. It's market cap is roughly $4.4 billion. But while Archer is a speculative stock, there are some catalysts that could lift its share price higher.

Archer expects that it will finally begin commercial operations for its Midnight eVTOL this year. With roughly $6 billion in orders already on the books, its revenues will likely grow rapidly if the company receives regulatory approvals for its flying taxis in key markets.

Perhaps even more exciting, Archer recently announced that it had formed a partnership with Anduril to make flying EVs for the defense industry. Anduril is an innovation-focused defense technologies company, and it has already won U.S. defense contracts for unmanned autonomous vehicles. Between its pioneering position in the commercial flying taxi space and potentially massive opportunities in the defense industry, Archer has clear paths to growing into and exceeding its current valuation.

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