$10,000 in Archer Aviation at Last Year's High Is About $3,840 Now. Here's What Gets It Back. |

Archer Aviation (ACHR -1.70%) stock peaked at $14.62 last October. A $10,000 investment at that price bought about 684 shares. At about $5.61 as of this writing, those shares are worth about $3,840 — a decline of about 62% in less than a year.

The business didn’t shrink over that stretch. The air taxi maker’s flight testing expanded, and its certification work with the Federal Aviation Administration (FAA) reached the final phase of what Archer describes as the FAA’s four-phase process.

What fell is the price the market puts on waiting for revenue.

What gets a position like that back to even? Three things could do it: the type certificate that would approve the design of Midnight, Archer’s electric aircraft, the first fare revenue, and airline orders turning into deliveries.

But these three aren’t equally close.

The old high now means a bigger company

Getting back to $14.62 would mean a climb of about 160% from here. And the target keeps moving, because Archer pays for its progress with stock.

The company had about 549 million shares outstanding in May of last year, about 651 million around the time of the peak, and about 770 million as of early August — 18% more than at the high. At the peak, the whole business was valued near $9.5 billion. And at the current count, $14.62 per share implies a company worth more than $11 billion. In other words, the old share price now requires a bigger company.

More shares are likely coming, too. Archer agreed in August to acquire three businesses from Boeing, including Insitu, a drone maker with more than $200 million in annual revenue. Boeing is taking an equity stake as part of the deal, which is expected to close by year-end.

In Archer’s second-quarter letter to shareholders, CEO Adam Goldstein wrote that integrating the businesses “will not structurally increase our overall cash burn.”

However, the loss Archer guides on has been widening. Its adjusted EBITDA loss (a non-GAAP measure that excludes stock-based compensation, among other costs) was $118.7 million in the year-ago quarter, reached $177.1 million in the second quarter, and could hit $200 million in the third, based on management’s guidance. The company’s cash and short-term investments totaled about $1.6 billion when the second quarter closed. Losses like that help explain the growing share count.

Which milestone moves the stock?

Certification progress alone hasn’t moved the stock much this year. Archer said in May that Midnight had closed out the FAA’s Phase 3, making it the first electric vertical takeoff and landing aircraft to get that far. The stock ended that week lower than it started.

Progress like that, it seems, is already priced in.

But the response to revenue has been different. In August, the month Archer announced the Boeing deal and the annual revenue expected to come with it, the stock rose about 25%. I think the market pays for revenue arriving, not for process advancing.

Still, the certificate is the condition the biggest money waits on. United Airlines‘ (UAL -0.48%) aircraft order can’t convert without it, and routine commercial service in the U.S. needs the FAA’s sign-off.

Order conversion comes last

The first fare may be the nearest of the three. In March, Archer said it was targeting passenger-carrying flights in 2026, and it plans to begin operating later this year under a federal pilot program, even as certification work continues. Its current revenue ($5 million last quarter) comes primarily from operating Hawthorne Airport in Los Angeles, not from fares.

The certificate’s timing is less clear. Phase 4, the formal testing that ends in a type certificate, is underway, though management hasn’t put a date on the finish.

Order conversion sits furthest out. United’s agreement is a conditional purchase order for up to 200 aircraft worth up to $1 billion, plus an option for another $500 million. Not only is the order conditioned on certification, among other things, but converting it also requires production at scale. And of that potential $1.5 billion, Archer has collected a $10 million pre-delivery payment.

Conversion is also the only condition sized to the full climb. A company worth more than $11 billion probably needs aircraft revenue, not airport revenue.

Ultimately, the way back to $14.62 runs through all three conditions, and the one big enough to finish the job comes last. For investors who bought near the high and still hold, those three milestones matter more than the old price.

As for new money, I wouldn’t buy shares here. A 62% discount to the old high arguably isn’t compelling enough on its own. I’d rather wait for the certificate before even considering buying.