Archer Aviation Inc (NYSE: ACHR) has rallied nearly 30% in two weeks at a time when the majority of speculative names are struggling due to uncertainty coming out of the White House.
But the broader environment is far from one that should make investors chase the ongoing surge in ACHR shares in March, according to famed investor Jim Cramer.
Responding to a caller on “Mad Money”, the former hedge fund manager issued a stark warning on the eVTOL company, adding “in this kind of market, it’s an invitation to your funeral.”
Despite recent surge, Archer Aviation stock is down close to 25% versus its year-to-date high.
Cramer is fine with investing in ACHR for the long term
San Jose, CA based Archer Aviation is committed to reshaping the future of urban air mobility.
It’s a name that has high potential for growth but, unfortunately, is coupled with very high risk as well, which makes it an unsuitable pick against the current macroeconomic backdrop.
However, investing in ACHR stock for the long term may not be the worst of ideas, according to Jim Cramer.
“A lot of people think Archer is a little out there, like it’s ‘lost in space.’ But they just received FAA certification for a Public Training Academy. Maybe this thing is for real,” he argued on his CNBC show.
Archer Aviation stock is no inexpensive to own
Archer has a beta of 3.14 at writing, which suggests it’s more volatile than the market at large.
It’s reasonable to tag ACHR shares as risky investment since they are currently trading at a price-to-book ratio of 6.29 – also notably higher than the market average.
Plus, a deeply negative free cash flow of about $450 million further illustrate why Archer Aviation stock is significantly overvalued at the time of writing.
Finally, shares of the US based eVTOL company do not currently pay a dividend either to make it any easier for investors to look past its concerning valuation metrics.
How analysts recommend playing ACHR shares
Despite uncertainty, experts seem to be keeping more focused on the company’s broader vision of transforming the future of urban mobility.
In the final quarter of 2024, Raymond James loaded up on nearly 0.75 million shares of Archer Aviation.
The stake worth about $7.24 million made the firm 0.17% owner of ACHR.
Wall Street is keeping bullish on Archer stock as well.
The consensus rating on ACHR shares sits at “overweight” currently with the mean target of $11.39 indicating potential upside of more than 30% from current levels.
That said, Archer lost over $198 million in its latest reported quarter.
In February, it guided for adjusted EBITDA loss of $95 million to $110 million for its fiscal Q1 as well.
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