Here's Why Archer Aviation Stock Is a Buy Before Aug. 1

It already has an electric vertical takeoff and landing (eVTOL) aircraft called Midnight that is being tested for reliability

That's the next big step, but as a start-up trying to break into a capital-intensive industry, Archer is in a race against the clock

When it reports second-quarter earnings in early August, the is ly to be very positive

Here's why more-aggressive investors might want to buy before the upcoming earnings release

What does Archer Aviation do

Right now, Archer spends lots and lots of money -- and for good reason

The company is looking to break into the aerospace industry, which is a mature sector with a small number of very large players that dominate the space

So it is taking on a very material task

Image source: Getty Images

The edge that Archer is trying to exploit is a new type of aircraft

Its eVTOL is a short-haul airplane that will be used as an air taxi

That's a completely different way to think airplanes

It already has a totype and is starting to ramp up duction

The airplanes it is ducing are largely meant for testing, so it isn't making money selling them just yet

But it has to spend money because it needs to have its eVTOL fully vetted by regulators if it wants to earn apval by the Federal Aviation Administration (FAA) to carry commercial customers

There are two big issues that come out of this strategy

FAA apval is highly important to Archer's future

And, since it can't really earn money until it gets that apval, access to capital is also vitally important

Second-quarter earnings are ly to show imvement on both fronts

Where does Archer stand today

However, management made a key in its first-quarter holder letter, noting that the pace of the apval cess was ly to increase

On that score, a company press release on June 2 described a piloted flight of its aircraft as it moved on to the next phase of flight testing

It discussed the piloted test flight, but the real point of the release is to tell the world that it is moving forward in the FAA apval cess

When the company reports earnings, this flight -- and any subsequent flights -- will ly be discussed in greater detail

And there will be an on the overall apval gress

Assuming the pace of apval picks up, as management has suggested, the company is moving closer and closer to generating revenue

That said, it is still a cash-burning start-up

So investors will also want to pay close attention to Archer's balance sheet

And the here also seems ly to be a positive one

With the sale, the company reported that its liquidity position was around $2 billion

The more cash it has, the more ly it is that it will be able to fund itself through the apval cess

And that backs the long-term thesis for investors buying the stock in the hopes it can successfully break into the aerospace industry with an air taxi

To be fair, it is still a high-risk investment, so only more-aggressive investors should be looking at it

But if you can handle owning a risky stock, buying before Archer Aviation's next earnings could make a lot of sense

Reuben Gregg Brewer has no position in any of the stocks mentioned

The Motley Fool has no position in any of the stocks mentioned

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