AeroVironment Nasdaq:AFAF December’s price contraction is a buying opportunity given its position as a next-generation defense contractor, strong results, growth, guidance, analyst trends, and institutions that are buying this stock like crazy. Institutional activity is noteworthy because the group owns more than 85% of the shares, has been buying on a quarterly basis in 2024, and the balance of activity is rising. The balance of activity in the first two months of the fourth quarter reached a multi-year high with another month to go, providing a strong boost to the market. These trends are unlikely to end, and it is more likely that this stock will quickly regain its rise, resume the uptrend, and move to new highs.
AeroVironment today
(As of 5/12/2024 at 06:15 PM ET)
- 52 week range
- $116.51
▼
$236.60
- P/E ratio
- 77.76
- Price target
- $211.83
What does AeroVironment do? It makes drones, but more importantly, it makes AI-enhanced loitering munitions systems that give Western powers an air advantage. The LMS uses high-output electrical systems to remain on station for hours, flying over targets using computer vision and other artificial intelligence enhancements to monitor and search for targets. Drones either deliver the payload or are the payload. Among the drivers of AeroVironment’s business today is the growing demand for next-generation systems, including AVAV’s retrofit AI toolkit for legacy models and global remilitarization. Military spending reached a new high in 2024 and is expected to grow in calendar 2025.
AeroVironment declines after mixed quarter and light guidance
AeroVironment had a strong quarter for FQ2 2025/CQ3 2024, with revenue rising 4.2% to a record quarterly level. The top line is roughly 400 basis points ahead of MarketBeat’s reported consensus of strength in LMS and MacCready Works. LMS sales grew 157%, while MacCready Works, where the most advanced unmanned systems are manufactured, grew 42%, offset by a 35% decline in legacy unmanned systems.
AeroVironment stock forecast today
$211.83
27.90% upHe buys
Based on 8 analyst ratings
| High expectations | $245.00 |
|---|---|
| Average expectations | $211.83 |
| Low expectations | $145.00 |
AeroVironment stock forecast details
Margin news is among the factors that affected the market after the release. The company reported a narrower gross margin exacerbated by increased SG&A expenses. The caveat is that gross margin contraction is associated with product mix shifting to LMS from legacy, and SG&A R&D and acquisition costs rise. Increasing SG&A is a concern, but R&D will drive technological advances and future sales, and acquisition costs will evaporate over time while driving future sales.
Steering is mixed. The company reiterated its guidance but failed to meet analyst consensus. Guidance may be cautious due to the 25% increase in funded backlog, but it will be a few months before that is confirmed. What investors should focus on is that the company is growing and is supported by tailwinds that will support the business until the end of next year.
The sell side supports AeroVironment: Don’t expect the price discount to continue
Sell-side trends, including analyst sentiment and institutional ownership, are bullish in 2024. Analyst trends include increasing coverage, improving buy sentiment from moderate buy, and a higher consensus price target. The first revisions tracked after the FQ2 2025 release confirm this trend and indicate a potential move towards the analysts’ high-end target range. Consensus indicates an upside of approximately 25% above the crucial support target, while the high-end range adds another 20%.
The technical action is unclear, as the market fell more than 10% and extended the sell-off that began in November. However, this market is volatile and moving higher within an ascending channel and will likely continue to do so this year due to sell-side support. The crucial support target is near the $170 level and may be tested more than once. A drop below this level will break the trend and lead to a trading range if not a larger drop. Confirmation of support will lead to a year-end rally and a move to the upper limit of the channel in early 2025.
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