So, here’s the thing: Shares of AeroVironment (AVAV), your favorite defense contractor – and I mean, who doesn’t love a good defense contractor, right? – just shot up 20% this week. And I’m sitting here thinking, ‘What did I miss?’
Apparently, it was a combination of factors. First, there were *five* price target raises from analysts. I don’t know, five? Seems a little excessive. It’s like they’re just trying to one-up each other. “I’m raising the target, no, I’m raising the target more!” It’s like a pricing war at the dollar store. But, hey, fine, let’s move on.
Then there’s this $499 million contract they landed with the U.S. Air Force Research Laboratory (AFRL). Just when you think you’ve heard it all, they get a deal worth almost half a billion bucks. Okay, I get it. The military likes drones, they like robots, they like things that go boom. Fair enough.
But what does this really mean? Well, obviously, it’s a big deal. But here’s the kicker. A lot of this has to do with their “High-Performance Electromagnetic Spectrum Survivable Materials Advancement” program. You heard me right – HELMSSMAN. Yeah, I can barely say it without stuttering. It’s basically about protecting people from electromagnetic radiation. I mean, you didn’t think we had to worry about that, right? But, apparently, we do. So, AeroVironment is on it. They’re solving the world’s invisible radiation problem. Who knew?
Now, here’s the thing: This contract is actually huge. Not just because of the money, but because it adds more than 10% to their backlog. You know what that means? That’s almost a billion-dollar pipeline if you factor in future contracts. And let’s not forget, this could add another three percentage points to their annual growth. That’s solid. But, you know, they might also be getting a little too comfy up there in their stratosphere.
Oh, and let’s not skip over the *real* transformation here: AeroVironment is no longer just the drone guys. They’re expanding, diversifying – you name it. After buying Blue Halo, they’ve got the equipment, software, and the research to be the ‘go-to’ in their little niche. If they weren’t doing ground robots and drones, what would they even be doing? Selling snacks in airports? Probably not. But this is some serious next-level defense contracting now. At least, that’s what they’d like us to think.
But, and this is important, they’re also trading at a staggering 99 times forward earnings. That’s, well, a lot. You’d expect this kind of exuberance in Silicon Valley, not the defense industry. But hey, what do I know? If you’re buying in at these levels, maybe you should consider doing it in chunks. You don’t just *throw* your money in at such a high valuation, do you? I mean, you’d have to be a bit of a sucker.
All in all, AeroVironment is riding high. But be careful. The market loves them right now, but those price targets – five of them, mind you – could easily come down if things don’t live up to the hype. So, take it slow. Maybe let them have their moment. You know, one of those “I told you so” moments down the road. Just don’t rush in. Wait for it. Wait for the inevitable hiccup. Because we all know it’s coming. It always does.
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2025-10-03 13:28