Cathie Wood, CEO of Ark Invest, is known for making moonshot bets. While most fund managers balance their portfolios with a healthy mix of blue-chip, growth, and even some speculative stocks, Wood tends to create positions in riskier opportunities.

One title that has recently become a staple in Wood’s buying activity is Archer Aviation (ACHR 12.71%)a manufacturer of electric air taxis. Between October 28 and November 13, Ark Invest purchased 2.5 million shares of Archer.

Nearly a month later, on December 13, Wood doubled his bet on Archer, collecting a whopping 5 million shares across his turf. ARK Innovation, Autonomous technology and ARK roboticsAnd ARK Space exploration and innovation exchange traded funds (ETF).

With shares trading below $10, has Wood identified a rare offering in the electric vehicle (EV) industry? Let’s explore some of the developments underway at Archer to better assess whether now is a good opportunity to follow Wood’s lead and buy shares.

It’s been a busy month for Archer

Since Wood started increasing Purchase activity from Ark to Archer In late October, shares of the EV player soared 166% as of market close on Dec. 17.

ACHR data by Y Charts

Here’s some notable news surrounding Archer over the past month and why these events likely inspired an uptick in the stock.

• November 7: Japan Airlines and Japanese conglomerate Sumitomo recently formed a joint venture called Soracle Corporation. As part of this initiative, Soracle is developing an advanced air mobility plan to alleviate pressures on ground transportation in highly congested and densely populated areas by offering EV air taxi flights as an alternative form of mobility. Soracle chose Archer to assist with this project, placing an order for 100 Archer Midnight aircraft, a contract estimated to be worth $500 million.
• November 19: Boutique investment bank Needham initiated coverage of Archer shares on Nov. 19 and placed a buy rating on the stock with a projected price target of $11.
• December 12: Earlier this month, Archer entered into a major alliance with Anduril — a rising star in the development of autonomous solutions for military operations. As part of the same announcement, Archer said it had raised $430 million in equity capital from existing partners. Stellantis And United Airlines to help finance its ambitions in the field of defense.

While each of these scenarios is an exciting development for Archer, I would argue that some of the potential in these deals is starting to be priced into Archer stock, given their massive run over the past month. Still, with such an exciting roadmap ahead, there is still much to discover before determining whether buying Archer stock right now fundamentally makes sense.

Image source: Getty Images

Is Archer Aviation stock a buy?

There is no doubt that Archer’s air taxis have generated considerable interest. Personally, I’m encouraged by the company’s ability to attract attention across multiple end markets, including traditional commercial applications and the U.S. military.

But that said, it’s important to remember where Archer is in his life cycle. The company has yet to generate revenue and until the dollars come in, Archer will remain an expensive stock, given its cash burn.

To be frank, I think Wood got very lucky with Archer. When she purchased the shares in late October, it was likely an effort to reduce Ark’s value. cost basisgiven the low level of stock trading. And while I can only speculate, I have to think that Ark’s massive purchase on December 13 was influenced by the Anduril partnership and new equity financing – thus providing Archer with some degree of runway and mitigating liquidity pressures until the company begins to commercialize its operations. .

In many ways, I see Archer as an up-and-coming athlete touted as the “next Michael Jordan” before he’s even played a game at the professional level. While these comparisons make for good storytelling, much speculation remains. I believe an investment in Archer is only for those who are comfortable with volatility, unpredictability and the unknown.