Archer Aviation's Turbulence: A Test for eVTOL Startups in the Post-Buffett Era of Value Investing

In the ever-shifting landscape of modern investing, the electric vertical takeoff and landing (eVTOL) sector has emerged as both a beacon of innovation and a cautionary tale. Archer Aviation (ACHR), one of the most prominent players in this niche, has recently faced a perfect storm of legal and financial challenges that have sent its stock plummeting. For value investors, these events raise a critical question: Can the eVTOL industry, and companies like Archer, reconcile their speculative nature with the principles of disciplined, long-term investing?

The Perfect Storm: Legal and Financial Headwinds

Archer's shares fell by as much as 14% in five trading days in 2025, driven by two key factors. First, a Delaware Chancery Court allowed a shareholder lawsuit over its 2021 SPAC merger to proceed, alleging misrepresentation of development timelines and share value. Second, Stellantis, a major backer and manufacturing partner, announced a $2.68 billion first-half loss, raising fears it might scale back support for Archer's hydrogen-powered eVTOL ambitions. While Stellantis insists it remains committed to the eVTOL market, the perceived risk of reduced collaboration has rattled investor confidence.

Archer's financials further underscore the challenges. The company reported a $93.4 million net loss in recent earnings and has relied on capital raises to sustain operations. A $850 million equity offering in June 2025, while boosting liquidity to $2 billion, triggered a 15% stock drop due to concerns over valuation and dilution. Analysts remain divided, with a "Moderate Buy" consensus and an average price target of $11.75, but the stock's volatility reflects the sector's high-risk profile.

The Buffett Lens: Value Investing in the Age of Disruption

Warren Buffett's value investing principles—prioritizing durable competitive advantages, predictable cash flows, and strong balance sheets—serve as a useful framework to evaluate Archer's prospects. Buffett, known for his cautious approach to unproven industries, has historically avoided speculative bets. His 2024 shareholder letter emphasized the importance of compounding returns and risk discipline, warning against overpaying for uncertain futures.

Archer's financials starkly contrast with Buffett's ideals. The company's enterprise value to revenue (EV/Revenue) multiple of 37.8x far exceeds that of traditional aerospace firms like Lockheed Martin (10.5x). Its negative return on invested capital (-15.2%) and lack of near-term revenue highlight a business model that prioritizes growth over profitability. These metrics align with the speculative nature of the eVTOL sector, where companies often trade on future potential rather than current performance.

Regulatory Hurdles and Market Potential

Despite these challenges, Archer remains on track for FAA Type Certification of its Midnight aircraft by year-end 2025, with commercial operations slated for 2026. The company has secured a $1 billion order for 200 aircraft from United Airlines and plans to launch services in major cities like New York and Los Angeles. Its participation in the 2028 Los Angeles Olympics further validates its strategic positioning.

The eVTOL market is projected to grow from $760 million in 2024 to $170.6 billion by 2034, according to industry forecasts. This explosive growth potential is a double-edged sword: it justifies optimism for early-stage innovators but also magnifies the risks of regulatory delays and operational missteps. Archer's regulatory progress is critical, but only 15% of required FAA compliance documents have been approved as of 2025, pushing commercialization to as late as 2027 in some cases.

The Post-Buffett Dilemma: Speculation vs. Substance

For value investors, the eVTOL sector embodies the tension between innovation and prudence. While Buffett's philosophy would likely steer clear of companies like Archer, the post-Buffett era has seen a shift toward embracing disruptive technologies, albeit with caution. Investors like Cathie Wood, who advocate for high-risk, high-reward bets on transformative industries, view eVTOLs as a long-term play. However, this approach diverges from the core tenets of value investing, which prioritize stability and downside protection.

Archer's struggles reflect broader challenges in the eVTOL industry. Competitors like Joby Aviation, which has a $813 million cash reserve and a $12.8 billion market cap, are also navigating regulatory delays and capital constraints. The sector's reliance on government partnerships, infrastructure development, and public acceptance further complicates its path to profitability.

Strategic Implications for Investors

For long-term investors, the eVTOL sector is not a value investing play but a speculative one. Archer's recent turmoil underscores the importance of patience and rigorous due diligence. While the company's strategic partnerships and regulatory progress are promising, its financial metrics—high burn rates, negative ROIC, and unproven business models—warrant caution.

A disciplined investor might consider a small, time-diversified position in the sector only if fundamentals improve, such as clearer regulatory pathways, reduced capital needs, and scalable infrastructure. For now, the eVTOL industry remains a high-risk bet, best suited for investors with a long time horizon and a tolerance for volatility.

Conclusion

Archer Aviation's stock plunge and legal challenges are a microcosm of the eVTOL sector's broader risks and rewards. While the company's vision for urban air mobility is compelling, its financial and operational hurdles align more closely with the speculative nature of growth investing than the principles of value investing. In the post-Buffett era, where innovation and disruption are celebrated, investors must balance optimism with pragmatism. For Archer and the eVTOL industry, the path to viability will require not just technological breakthroughs, but financial discipline and regulatory clarity. Until then, the sector remains a high-stakes gamble—a test of whether the future of flight is worth the risk of today.