AeroVironment (AVAV +5.95%) has, it appears, enjoyed a rather spirited week, ascending by as much as 17.2% according to the diligent chaps at S&P Global Market Intelligence. The closing price on Thursday still reflected a respectable gain of 15.5%, a performance which, one suspects, has little to do with fundamental value and everything to do with a temporary diversion of public attention.
The catalyst, if one can dignify it with such a term, involved a minor incident at El Paso International Airport. The airspace, with a characteristic lack of foresight, was abruptly closed due to a drone incursion originating, naturally, from Mexico. One pictures a rather indignant air traffic controller.
A Laser-Focused Valuation
Conflicting accounts subsequently emerged, hinting at the deployment of counter-drone lasers by either the military or Customs and Border Protection. The device in question, it transpires, was AeroVironment’s LOCUST system – a direct-energy laser weapon. One gathers it is intended to vaporize unwelcome aerial visitors, a rather dramatic solution to a problem that might, conceivably, be addressed by a well-aimed net.
JPMorgan Chase’s Seth Seifman, ever the optimist, has initiated coverage with an ‘overweight’ rating and a target price of $320. This, at the time of his pronouncements on Tuesday, represented a 31% upside. The market, with its usual haste, has already narrowed the gap. One wonders if Mr. Seifman is acquainted with the concept of reversion to the mean.
He argues, quite correctly, that AeroVironment operates in the fashionable areas of defense – drones, counter-drone systems, and space. Rising defense budgets and geopolitical anxieties, he further notes, justify the company’s, shall we say, premium valuation. A convenient justification, certainly, though one suspects that a rising tide of military spending merely floats all boats, regardless of their seaworthiness.
At 173 times earnings and 82 times forward earnings, AeroVironment is, undeniably, priced for perfection. As a leader in next-generation warfighting technology, it is well-positioned to benefit from the current climate of, shall we say, heightened global tension. However, investors would be advised to approach this highflier with a degree of caution. After all, even the most meticulously engineered contraption is, ultimately, subject to the laws of gravity.
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2026-02-20 14:02