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AeroVironment (AVAV) Lands $464.8 Million Laser Contract, Is The Stock Still Expensive?

Simply Wall St · 2d ago

AeroVironment event puts backlog and profitability in focus

AeroVironment (AVAV) has received a US$464.8 million Enduring High Energy Laser production contract and reported a funded backlog of US$1.5b plus about US$1.4b in unfunded orders, while still working through profitability pressures.

AeroVironment’s share price has fallen sharply this year, with a year-to-date share price return of down 43.97% and a 1-year total shareholder return of down 63.67%. However, the 3-year and 5-year total shareholder returns of 31.87% and 62.80% indicate a much stronger longer-run track record.

Scan how AeroVironment’s contract-heavy backlog compares to other defense and robotics players by checking out the hand picked 90 robotics and automation stocks in this segment.

AeroVironment now has sizeable contracts and a large backlog on one side, and a share price that has dropped sharply on the other. Is this a strong business that is temporarily mispriced, or a fair tag for its profitability strain?

Most Popular Narrative: 38% Overvalued

AeroVironment last closed at $143.54, while the most followed narrative pegs fair value nearer $103.94. This frames the current gap as a valuation premium that needs explaining before you decide how to treat the drawdown.

The prior call used inflection-point language as anticipatory framing: things are approaching an inflection point. The current one uses it retrospectively, to describe something that has already arrived. Nawabi deploys the phrase in relation to LOCUST specifically at least five times across prepared remarks and Q&A: “We are at an inflection point.” “This is an inflection point.” “I think we are at a similar inflection point.” The density of the phrase is notable because inflection points, by definition, are singular. When a company declares one, the narrative utility of the declaration diminishes with each repetition. By the fifth instance, it functions more as tonal reinforcement than analytical signal.

See why 8 investors see AeroVironment as 38% overvalued.

Result: Fair Value of $103.94 (OVERVALUED)

Still, AeroVironment’s unresolved internal controls weakness and the absence of updates on prior space and software commitments could quickly challenge this overvaluation storyline.

Find out about the key risks to this AeroVironment narrative.

Next Steps

If the AeroVironment story so far feels mixed, that is the point, and it is exactly why you should review the data yourself and pressure test every assumption. To weigh the optimism around its 1 key reward against the current valuation debate, start with the 1 key reward.

Looking for more AeroVironment style investment ideas?

If AeroVironment has you thinking harder about valuation, risk and balance sheet strength, do not stop here. Broader opportunity often sits just outside your current watchlist.

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.