Ark Invest’s Cathie Wood is particularly known for her high conviction in emerging themes that disrupt sectors such as technology or life sciences. While Wood has earned her share of media coverage, I will admit that sometimes I find her investment a bit over the top.

We recently noticed that Ark Invest added a significant portion to its position in electric take off and landing company Archer Aviationn (ACHR 11.14%). With Archer shares trading for just $3.26 at the time of writing, is Wood getting a good deal? Let’s dig in and find out.

Cathie Wood heads off with Archer, but…

In a way, Ark’s ownership of Archer stock makes a lot of sense. Wood was an early bull adzeoften publishing research with stock price targets for the electric vehicle (EV) maker that seemed completely out of touch with reality — that is, until Tesla eclipsed those price ranges, despite widespread skepticism from those less optimistic about the potential the company.

For me, Archer represents a different form of exposure to the broader EV sector — one that’s tangential to Tesla. While that notion might bolster 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 October 30, Ark acquired 2.5 million shares of Archer in three separate purchases. Given Archer’s apparently low share price, it might appear that Wood does too buying dip on a potentially lucrative opportunity to disrupt the EV 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. Anecdotally, I’m intrigued by the idea of airborne EV taxis that augment mobility models — especially in more densely populated environments such as cities.

But that said, Archer has yet to gain enough traction to truly prove whether his vision is sustainable. I say this because in spite of her billion dollar purchase order bookthe company does not recognize another $1 of revenue.

As long as sales don’t come through the door, Archer will continue to accrue costs in the form of capital expenditure (capex) and continuous research and development (R&D).

… keep these things in mind

Just as Tesla is not the only manufacturer of EVs, Archer’s presence in electric take-off and landing vehicles is not exclusive. The company competes strongly with Joby Aviationanother position in Ark’s portfolio – and one in which Wood gained shares around the same time as her recent Archer purchases. There are also several other private competitors.

Archer is a core position in three of Wood’s exchange-traded funds (ETFs): ARK Autonomous Technology & Robotics ETF, ARK Space Exploration & Innovation ETFand ARK Innovation ETF. Given this information, I honestly believe that Archer is simply a diversification play — or hedge — for other companies that Wood has invested in in various industries such as autonomous vehicles, robotics and space exploration.

Despite trading for “only” about $3 a share, the company’s market cap is $1.3 billion. I don’t know about you, but I’m not too keen on paying over $1 billion for a company that’s burning cash and not yet generating sales.

In my view, a stock like Archer is too speculative at this point. While I like the idea of ​​the company, I fear its long-term potential. Simply put, investing 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 the move toward large-scale commercialization and revenue generation. Until then, I see Archer as a cool idea, but not necessarily a good investment choice.