Why AeroVironment Stock Was Soaring This Week
Key Points
They included a fresh government investment and a new contract with the Air Force.
As if that weren't enough, it seems the White House wants to directly buy into its industry.
The past few days have been eventful for drone maker AeroVironment (NASDAQ: AVAV) and, consequently, there's been plenty of action in its stock. These were generally positive and helped push the company's equity up by 23% week to date as of Friday before market open.
Rising like one of its drones
On Tuesday, Aerovironment announced that the federal government had approved a new $20.2 million investment to expand the company's factory in Huntsville, Alabama. These funds are to be used to increase the output of its Freedom Eagle-1 (FE-1), an unmanned aircraft system missile.
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Two days later, AeroVironment revealed that it's been awarded a $20 million contract by a research arm of the Air Force. This is to be devoted to research on next-generation ceramic and ceramic matrix composite materials for "extreme" use cases in defense and aerospace technology.
The most powerful catalyst for the stock over the week also occurred on Thursday. The Wall Street Journal reported that the Trump administration aims to invest in drone companies to boost the domestic industry. Another goal would be to lower the costs of such goods.
Citing unnamed "people familiar with the matter," the Journal wrote that this effort is in a discussion phase. Those sources said that companies being considered for investment include Unusual Machines (which, incidentally, has Donald Trump Jr. as a shareholder and member of its advisory board) and an early stage enterprise, Neros Technologies.
Inclusion despite exclusion
AeroVironment wasn't identified as one of those drone companies, but that was hardly necessary for it to become a hot stock. Even if the company doesn't get a dollar of federal money, it's sure to gain simply by being inside a sector favored by this country's executive branch.
At this point, though, the federal investments are speculation. That grant for the factory and the new Air Force contract, however, are concrete developments heightening AeroVironment's prominence at a time when drones are popular. I think that alone should be enough to inspire any investor to consider buying the stock.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AeroVironment. The Motley Fool has a disclosure policy.