Archer tanks 12% after air taxi maker sells additional 85 million shares, buys LA-area airport
Courtesy: Archer Aviation
Archer Aviation‘s stock plummeted 12% after a share sale overshadowed a narrower-than-expected third-quarter loss.
The company posted a net loss $129.9 million, narrower than the FactSet estimate of a $178.6 million loss.
However, Archer disclosed a $650 million stock offering for 81.25 million shares to support its $126 million acquisition of Hawthorne Airport in Los Angeles as a hub for air taxi operations there. Archer was chosen as the official air taxi provider for the 2028 Olympics in Los Angeles.
The move would dilute the value of the stock for existing shareholders. The weighted average for Archer shares outstanding has grown to about 660.9 million from 397.5 million a year ago.
Interest in electric aircraft makers has picked up in recent months as major players have edged closer to certification. Earlier this week, Beta Technologies went public on the NYSE.
Archer, like its competitors, is taking major steps toward achieving Federal Aviation Administration certification, a key approval needed to fly commercially.
In September, Archer said its Midnight aircraft reached a record altitude of 7,000 feet. The milestone came about a month after the company achieved its longest piloted flight.
Archer has bet big on building and deploying air taxis in the United Arab Emirates as competitor Joby Aviation teams up with Saudi Arabia.
For the current quarter, Archer said it expects a loss between $110 million and $140 million for adjusted earnings before interest, taxes, depreciation and amortization, a loss of $125 million at the midpoint. Analysts expected a loss of $119.9 million, according to FactSet.
Earlier this week, Joby Aviation reported a wider-than-expected third-quarter loss. Shares have slumped 20% over the last week, while Archer has lost nearly a third of its value. Both companies have more than doubled in value over the last year.
Archer Aviation and Joby Aviation year-to-date stock chart.
State Street is reiterating its bullish stance on the artificial intelligence trade despite the Nasdaq’s worst week since April.
Chief Business Officer Anna Paglia said momentum stocks still have legs because investors are reluctant to step away from the growth story that’s driven gains all year.
“How would you not want to participate in the growth of AI technology? Everybody has been waiting for the cycle to change from growth to value. I don’t think it’s happening just yet because of the momentum,” Paglia told CNBC’s “ETF Edge” earlier this week. “I don’t think the rebalancing trade is going to happen until we see a signal from the market indicating a slowdown in these big trends.”
Paglia, who has spent 25 years in the exchange-traded funds industry, sees a higher likelihood that the space will cool off early next year.
“There will be much more focus about the diversification,” she said.
Her firm manages several ETFs with exposure to the technology sector, including the SPDR NYSE Technology ETF, which has gained 38% so far this year as of Friday’s close.
The fund, however, pulled back more than 4% over the past week as investors took profits in AI-linked names. The fund’s second top holding as of Friday’s close is Palantir Technologies, according to State Street’s website. Its stock tumbled more than 11% this week after the company’s earnings report on Monday.
Despite the decline, Paglia reaffirmed her bullish tech view in a statement to CNBC later in the week.
Meanwhile, Todd Rosenbluth suggests a rotation is already starting to grip the market. He points to a renewed appetite for health-care stocks.
“The Health Care Select Sector SPDR Fund… which has been out of favor for much of the year, started a return to favor in October,” the firm’s head of research said in the same interview. “Health care tends to be a more defensive sector, so we’re watching to see if people continue to gravitate towards that as a way of diversifying away from some of those sectors like technology.”
The Health Care Select Sector SPDR Fund, which has been underperforming technology sector this year, is up 5% since Oct. 1. It was also the second-best performing S&P 500 group this week.
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