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Laser Contract Wins Could Be A Game Changer For AeroVironment Stock

Simply Wall St · 1d ago
  • AeroVironment announced several large defense wins, including a US$464.8 million U.S. Army Enduring-High Energy Laser production contract and the first international order for its LOCUST laser weapon system, plus fresh Switchblade 600 deliveries under an existing US$990 million U.S. Army agreement.
  • The move from prototype to production on LOCUST X3, supported by over US$30 million in manufacturing expansion and new international demand, points to heavier volume commitments and more complex execution requirements across AeroVironment’s directed energy and loitering munitions businesses.
  • Now it is time to assess how the first large scale LOCUST production contract may influence AeroVironment’s broader investment narrative.
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AeroVironment Investment Narrative Recap

To stay invested in AeroVironment, you need to believe in a defense technology platform that can turn a growing backlog in drones, loitering munitions, and directed energy into durable cash generation. The recent LOCUST production and export wins speak directly to that thesis. They reinforce the short term catalyst, which is execution on a wave of large, multi year contracts while scaling the expanded Albuquerque site. The flip side is operational. Margin pressure after the BlueHalo deal, a still unprofitable bottom line, and heavy reliance on U.S. budgets remain the central risk cluster.

The U.S. Army’s US$464.8 million Enduring High Energy Laser award is the key announcement to watch against this LOCUST narrative. It shifts AeroVironment’s directed energy work from one off prototypes to a defined production run, with dozens of LOCUST X3 units slated for delivery over several years. That creates clearer demand visibility but also heavier execution stakes on integration, field support, and cost control. If the E HEL rollout runs smoothly, it can support the case for better utilization of the New Mexico build out and a broader directed energy franchise.

Yet there is a practical hitch that could complicate this whole AeroVironment story if ...

Read the full AeroVironment narrative to see the case behind these numbers.

AeroVironment's narrative projects US$3.0b revenue and US$160.6m earnings by 2029. This aligns with analysts' expectations of 14.3% yearly revenue growth and an earnings change of about US$425.7m from a loss of US$265.1m today.

AeroVironment's forecasts place fair value at $225.77 versus the $144.65 share price, a 56% upside to its current price that could narrow quickly.

NasdaqGS:AVAV 1-Year Stock Price Chart
NasdaqGS:AVAV 1-Year Stock Price Chart

Exploring Other Perspectives

One alternate view focuses on how fragile AeroVironment’s contract mix could be. The most cautious analysts worry that any shift in government budgets or tighter export rules could derail the LOCUST story, which is a direct defense export. Before this news, they were only pencilling in about US$2.9b revenue and US$141.4m earnings by 2029. That is far more conservative than consensus and could change if directed energy orders keep building. Consider these two narratives as bookends and decide where your own expectations sit.

If you want extra context around AeroVironment's pricing, compare it with the 8 other fair value estimates for AeroVironment.

Reach Your Own Conclusion

Disagree with existing narratives? Extraordinary investment returns rarely come from following the herd, so go with your instincts.

Looking For More Investment Ideas Beyond AeroVironment?

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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.