Archer Aviation: Buy, Sell, or Hold?

Archer Aviation (NYSE: ACHR) has garnered a loyal following of investors who are optimistic about the company's innovative electric vertical takeoff and landing (eVTOL) aircraft. Contracts with the U.S. government and recent new funding are helping to drive the stock price, which is up 82% over the past 12 months.

But not everyone is optimistic. The company has yet to generate any revenue, and the recent share price gains mean investors are paying a premium for a company without sales.

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So, is Archer Aviation stock a buy, sell, or hold? Here's the case for each.

Image source: Getty Images.

The case for selling Archer

Many people are often quick to sell stocks. Reuters data from several years ago showed that the average length of holding a stock based on New York Stock Exchange data was just 5.5 months. That's a scarily short amount of time, and it shows the tendency for investors to make brash decisions when selling stocks.

A smarter idea is to hold on to the stocks you own, because the average investors tend to earn far more when they do. For example, J.P. Morgan data shows investors who took their money out during downturns and missed the 10 best days in the market earned returns that were less than half of those who kept their money in the market.

Instead of jumping into selling shares of Archer that you own, it's best to ask yourself these five important questions before you do:

• Is the company being acquired?
• Has your original investment thesis changed?
• Do you need the money for something else (college tuition, buying a home, or the like)?
• Do you need to rebalance your portfolio?
• Are there better investment opportunities elsewhere?

If none of these resonate with your personal financial needs or you don't have a better investment opportunity on your list, then it might be best not to sell your shares right now.

The case for holding

If selling Archer isn't a smart idea, why might it be worth holding on to shares? The company certainly has some momentum, including new funding, impressive contracts, and an upcoming air taxi program.

The company has already started production of its Midnight aircraft and conducted more than 400 test flights and says it will make 10 of them this year. It also recently announced its first commercial air taxi customer, Abu Dhabi Aviation.

And if that's not enough to convince you to hold on to your shares, the company also delivered a prototype to the U.S. Air Force last year and has an exclusive agreement with Anduril, an AI drone company, to develop an eVTOL for the U.S. Department of Defense.

The air taxi program and Midnight aircraft production haven't generated sales yet, but the company is on a promising trajectory. Most importantly, Archer recently raised another $300 million in funding, which gives it $1 billion in liquidity.

When you add all of this together, and you already own the stock, it may be worth keeping it to see how some of these partnerships will play out and if Archer will accomplish its production goals this year.

Is there a case for buying Archer?

Despite Archer having significant irons in the fire, I don't think the stock is a buy right now. I'm not tempted by shares of companies that aren't generating any revenue, and this is my main concern.

The company may have revenue later this year, but buying the stock right now is a fairly speculative investment, and it's coming at a time when it has already drastically jumped without sales or earnings.

I think potential investors should wait until the company reports at least a couple of quarters of revenue, see how well it delivers on its aircraft production, and for some of its contracts to actually generate sales before considering buying Archer. While the company looks promising, there are not enough concrete financial results to gauge whether it will transition from an innovative idea to a successful business.

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JPMorgan Chase is an advertising partner of Motley Fool Money. Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.