Archer Aviation Stock Sank Today — Is This a Buying Opportunity?

Archer Aviation (ACHR -8.92%) stock is seeing big sell-offs in Tuesday’s trading. The electric vertical takeoff and landing (eVTOL) aircraft specialist’s share price declined 9% in a session that saw the S&P 500 index’s level wind up flat and the Nasdaq Composite index fall 0.4%.

Archer Aviation is seeing sell-offs today in conjunction with the company’s announcement that it had raised $301.75 million in funding through the sale of new stock. Per Archer’s announcement, shares were sold to institutional investors, including funds and accounts managed by BlackRock. The new stock sale brought eVTOL pioneer’s total cash-and-equivalents position to roughly $1 billion, and the company says that the new funds will be used to fund its development of hybrid-power aircraft for the defense industry.

While having access to additional funds to develop new technologies will be beneficial to the company, investors responded negatively to the stock dilution. By creating and selling new shares, Archer effectively reduced the ownership stake of existing shareholders.

Is Archer Aviation’s stock sell-off a buying opportunity?

As a company that’s still not producing any revenue through its core business, it’s not surprising that Archer Aviation has moved to raise funding by selling new stock. It’s not the first time the company has sold stock to raise capital, and it almost certainly won’t be the last.

Despite the big sell-off today, the new share offering doesn’t signal any material negative shift in the company’s long-term outlook. In fact, new funding and investment from large institutional investors are probably positives for the stock.

As a company that’s still in a pre-revenue state, Archer Aviation frequently sees big valuation swings on relatively minor news. I actually think that the recent stock sale is a buy signal and that the company is a smart portfolio addition for risk-tolerant investors at current prices.

With Archer gearing up to launch commercial flights for its Midnight eVTOL craft this year and developing hybrid-power crafts for the defense industry, the company has potentially massive growth drivers on the horizon. If you’re willing to stomach the volatility that comes with investing in a pre-revenue business operating in a still nascent industry, Archer Aviation is a stock that could deliver huge long-term returns.