Key Highlights
- The company secured a $117 million military agreement with the U.S. Army for P550 Group 2 reconnaissance drones
- An additional contract for the Red Dragon attack drone was awarded simultaneously
- Raymond James revised its rating on AVAV from Underperform to Market Perform
- Analysts demonstrate strong support with 84% issuing Buy ratings and average price targets ranging from $312 to $318
- Prior to Monday’s rally, AVAV shares had declined approximately 25% during the previous three-month period
AeroVironment experienced a positive confluence of developments on Monday morning.
The defense contractor received a $117 million award from the U.S. Army on Friday for its P550 Group 2 reconnaissance drone system. The military also issued a concurrent, smaller agreement for the company’s Red Dragon attack drone platform.
William Blair analyst Louie DiPalma characterized these contracts as significant developments, noting that the Army anticipates allocating more than $1 billion toward long-range reconnaissance systems throughout the coming decade. DiPalma also highlighted the potential for the initial Red Dragon contract to expand substantially in scope.
DiPalma maintains a Buy rating on AVAV without establishing a specific price target.
AVAV began Monday’s session at $197.72, representing an approximate 5% gain during early market hours. This performance contrasted with the S&P 500, which advanced around 2%, receiving support from reports of diplomatic discussions between the U.S. and Iran.
Rating Revision Strengthens Positive Sentiment
Raymond James analyst Brian Gesuale elevated his rating on AVAV from Underperform to Market Perform on Monday, pointing to improved risk/reward dynamics following the stock’s recent decline.
Gesuale observed that the shares had experienced valuation multiple compression and downward estimate adjustments, factors that now approximately balance ongoing concerns. His analysis does not include a specific price target.
The analyst indicated he would prefer to observe increased backlog expansion before adopting a more bullish stance.
Before Monday’s session, AVAV had fallen nearly 25% during the preceding three-month timeframe. The decline was partially attributed to the Defense Department’s decision to reopen bidding on an antenna supply contract previously awarded to BlueHalo, an AeroVironment subsidiary.
Shares Trading at Significant Discount from Highs
As of Monday, AVAV was valued at approximately 50 times forward earnings, representing a decline from nearly 100 times just six months prior.
The stock reached a 12-month peak of $417.86, while the 200-day moving average stands at $291.46—substantially above current trading levels.
The company’s most recent quarterly earnings, released March 10, fell short of market expectations. Earnings per share came in at $0.64 compared to the consensus estimate of $0.68, while revenue of $408 million trailed the projected $487 million. Revenue still demonstrated robust year-over-year growth of 143%.
For fiscal year 2026, management has provided EPS guidance ranging from $2.75 to $3.10.
Despite recent underperformance, Wall Street maintains predominantly favorable views on the stock. Among analysts covering AVAV, 84% assign Buy ratings, significantly exceeding the 55–60% range typical for S&P 500 constituents. The consensus price target among analysts hovers around $318.
The Army contract finalized Friday could evolve into a more substantial revenue contributor in future years, particularly if anticipated follow-on contracts materialize as analysts project.
