A Look At AeroVironment (AVAV) Valuation After Major U.S. Army Drone Contract Wins
Event driven move in AeroVironment shares
AeroVironment (AVAV) has drawn fresh attention after securing U.S. Army contracts totaling US$887 million for unmanned aircraft, counter drone systems, and P550 uncrewed aircraft, alongside stronger options activity and rising geopolitical tensions.
See our latest analysis for AeroVironment.
The contract wins and geopolitical headlines have arrived alongside sharp share price swings, with a 7 day share price return of 31.66% and a 90 day share price return decline of 20.04%. The 1 year total shareholder return of 94.90% indicates strong longer term momentum.
If these defense contracts have caught your attention, it may be a good time to review other aerospace and defense stocks that are moving on similar themes.
With AeroVironment now trading at US$318.48 and analysts’ average price target sitting higher at about US$383.62, the key question is whether recent contract wins leave more upside on the table or if markets are already pricing in future growth.
Most Popular Narrative Narrative: 21.2% Undervalued
The most followed narrative sees AeroVironment’s fair value at about US$404 per share compared to the last close at US$318.48, so it leans clearly to the optimistic side and leans heavily on long term growth drivers to justify that gap.
AeroVironment's recent contract wins and rapid expansion into advanced areas like space-based laser communications and directed energy weapons position the company to capitalize on the persistent global shift toward defense modernization, addressing urgent demands among the U.S. and allied militaries, which is likely to support sustained top-line revenue growth and backlog visibility over multiple years.
Curious how this view gets to that higher fair value? It leans on fast revenue expansion, rising margins, and a future earnings multiple that is anything but modest.
Result: Fair Value of $404.00 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, this upbeat story could easily be tested if U.S. defense budgets shift or if rising competition in UAS and counter UAS puts pressure on pricing and margins.
Find out about the key risks to this AeroVironment narrative.
Build Your Own AeroVironment Narrative
If you see the numbers differently or like to review the data yourself, you can build your own version of the AeroVironment story in just a few minutes: Do it your way.
A great starting point for your AeroVironment research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.
Looking for more investment ideas?
If AeroVironment has sharpened your interest, do not stop here. The right watchlist often starts with a few well chosen themes you explore with intent.
- Spot early movers by scanning these 3553 penny stocks with strong financials that already show solid fundamentals instead of relying on hype or headlines.
- Target long term trends in automation and data by checking out these 26 AI penny stocks that are tied directly to real commercial use cases.
- Focus on price versus cash flows by reviewing these 886 undervalued stocks based on cash flows that our models flag as potentially mispriced on fundamental grounds.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com