Cathie Wood of Ark Invest is best known for her strong conviction in emerging, disruptive themes in sectors such as technology or life sciences. Although Wood has earned his share of media coverage, I admit that I sometimes find his investments somewhat far-fetched.

Recently, I noticed that Ark Invest added a significant amount to its position in electric takeoff and landing company Archer Aviationn (ACHR 11.14%). With Archer shares trading at just $3.26 as of this writing, is Wood getting a good deal? Let’s dig in and find out.

Cathie Wood goes after Archer, but…

In some ways, Ark’s ownership of Archer stock makes perfect sense. Wood was one of the first bulls Teslaoften publishing research with stock price targets for the electric vehicle (EV) maker that seemed completely out of touch with reality – until Tesla eclipsed those price ranges despite widespread skepticism from those less optimistic about the company’s potential.

For me, Archer represents a different form of exposure to the broader electric vehicle sector – one tangential to Tesla. While that notion may support the idea of ​​investing in Archer, Wood’s recent buying activity suggests she’s more than a little bullish on the company.

Between October 28 and 30, Ark acquired 2.5 million shares of Archer, spread across three separate purchases. Given Archer’s apparently low stock price, it may appear that Wood is buy the dip on a potentially lucrative opportunity that is expected to disrupt the electric vehicle market.

Image source: Getty Images.

…investors need to take a look under the hood, and…

In my eyes, Archer is stuck between proof of concept and product-market fit. For the record, I am intrigued by the idea of airborne electric taxis increase mobility models — especially in more densely populated environments such as cities.

But that said, Archer hasn’t yet gained enough popularity to truly prove whether his vision is sustainable. I say this because despite its billion dollar order bookthe company has not yet recognized $1 in revenue.

Until sales come through the door, Archer will continue to accrue costs in the form of heavy expenses. capital expenditure (capex) and ongoing research and development (R&D).

…keep these things in mind

Just as Tesla is not the only electric car maker, Archer’s presence in electric takeoff and landing vehicles is not exclusive. The company is in strong competition with Joby Aviationanother position in Ark’s portfolio – and one in which Wood also acquired shares around the same time as his recent purchases of Archer. There are also several other private competitors.

Archer has a central position in three of Wood’s exchange-traded funds (ETFs): ARK Autonomous Technology and Robotics ETF, ETF ARK Space Exploration and InnovationAnd ARK Innovation ETF. Given this information, I honestly think Archer is just a diversification – or hedging – play compared to other companies Wood has invested in across different sectors, such as autonomous vehicles, robotics and space exploration.

Although it “only” trades at around $3 per share, the company’s market cap is $1.3 billion. I don’t know about you, but I’m not very inclined to pay over a billion dollars for a company that is burning cash and not yet generating sales.

From my perspective, a stock like Archer is simply too speculative right now. Although I like the idea of ​​the company, I’m wary of its long-term potential. In simple terms, invest in Archer it’s very high risk, high reward.

For now, I think the prudent thing to do is to monitor the company’s progress in terms of additional partnerships and moving toward widespread commercialization and revenue generation. In the meantime, I view Archer as a good idea, but not necessarily a good investment choice.