AVAV Stock Risk & Deep Value Analysis
AeroVironment Inc
Industrials • Aerospace & Defense
DVR Score
out of 10
What You Need to Know About AVAV Stock
We analyzed AeroVironment Inc using our deep value framework. Sign in to see our full verdict and DVR Score.
We ran AVAV through our deep value framework — analyzing financial health, distress signals, competitive moat, and risk factors. Our risk assessment: Aggressive. Here's what we found.
AVAV Risk Analysis & Red Flags
What Could Go Wrong
The company's inability to successfully recompete for the terminated $1.7 billion U.S. Space Force contract, combined with continued goodwill impairments and negative Free Cash Flow in its strategic space division, could lead to sustained financial underperformance, necessitate highly dilutive capital raises, or force a significant restructuring of its long-term HAPS vision, severely impacting shareholder value.
Risk Matrix
Overall
Aggressive
Financial
High
Market
Medium
Competitive
Medium
Execution
High
Regulatory
Low
Red Flags
- ⚠
Termination of $1.7 billion U.S. Space Force SCAR contract, risking ~half of prior backlog.
- ⚠
Q3 FY2026 operating loss of $179M, including $151.3M goodwill impairment in space division.
- ⚠
Forecasted negative Free Cash Flow for FY2026.
- ⚠
Investor lawsuit investigation launched by Pomerantz Law Firm post-earnings miss.
- ⚠
Declining gross margins (Q2 FY2026: 20.9% vs 43% YoY).
Upcoming Risk Events
- 📅
Further deterioration of profitability and continued negative FCF
- 📅
Inability to re-secure major government contracts or win new ones in space division
- 📅
Unfavorable outcome of investor lawsuit investigation
When to Reconsider
- 🚪
Failure to secure significant new contracts or recover a substantial portion of the SCAR program within the next 12 months.
- 🚪
Continued negative Free Cash Flow and/or further declines in gross/operating margins for two consecutive quarters.
- 🚪
Any adverse developments or findings from the ongoing investor lawsuit investigation.
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What Does AeroVironment Inc (AVAV) Do?
Market Cap
$9.14B
Sector
Industrials
Industry
Aerospace & Defense
Employees
1,456
AeroVironment, Inc. designs, develops, produces, delivers, and supports a portfolio of robotic systems and related services for government agencies and businesses in the United States and internationally. It operates in two segments, Autonomous Systems; and Space, Cyber and Directed Energy. The company provides uncrewed aircraft systems (UAS), which include small and medium UAS, and kinesis command and control software; and counter-UAS and precision strike, a loitering munitions solution that deliver actionable intelligence and precision firepower modern warfighters, including precision strike, radio frequency and kinetic C-UAS, and electronic warfare systems. It also offers autonomy, AI, and platform technologies; unmanned maritime; uncrewed ground systems; and high-altitude pseudo-satellites. The company provides digital beamforming technology, a multi-band/beam software defined antenna tile that allows simultaneous communication with multiple satellites; laser communications, a data transmission systems for space operations; space-qualified hardware for line of sight stabilization and control electronics in low, medium, and geostationary earth orbit, as well as cislunar orbits; phased array antenna technology to supports hypersonic telemetry and tracking, and other missile testing; and directed energy solution. It also offers cyber solution for national security and defense operations; and HaloCortex OSINT, an AI-powered OSINT analysis platform to provide insights and solve department of defense and commercial challenges. AeroVironment, Inc. was incorporated in 1971 and is headquartered in Arlington, Virginia.
Visit AeroVironment Inc WebsiteInvestment Thesis
AeroVironment presents a high-risk, high-reward investment proposition. While its core drone business continues to show strength, the company is at an inflection point regarding its ambitious space division and HAPS program following significant operational and financial setbacks. The investment thesis hinges on the company's ability to stabilize its space segment, successfully recompete for lost contracts, and eventually translate its long-term HAPS vision into tangible, profitable revenue streams. This requires exceptional execution and risk management in the face of current challenges.
Is AVAV Stock Undervalued?
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AVAV Price Targets & Strategy
12-Month Target
$403.00
Bull Case
$450.00
Bear Case
$150.00
Valuation Basis
Based on average of recent analyst price targets of $397-$409, reflecting optimistic long-term recovery and HAPS potential, despite near-term headwinds.
Entry Strategy
Given high volatility and significant risks, consider a highly cautious dollar-cost averaging approach on clear signs of stabilization or successful recompete of the SCAR contract, ideally below current levels or around prior support zones near $150-$170. Wait for Q4 earnings for more clarity.
Exit Strategy
Profit-taking at $350-$400 if sentiment improves and execution stabilizes. Stop-loss if key support levels (e.g., $150) are decisively broken or if further negative financial guidance is issued.
Portfolio Allocation
1-3% for highly aggressive risk tolerance only. Not recommended for moderate or conservative portfolios due to extreme risk.
Price Targets & Strategy
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Is AVAV Financially Healthy?
Valuation
P/E Ratio
-42.18
Forward P/E
60.79
EV/EBITDA
71.48
PEG Ratio
3.21
Price/Book
3.23
Price/Sales
5.70
Profitability
Gross Margin
27.00%
Net Margin
-13.93%
Return on Equity
3.26%
Revenue Growth
15.70%
EPS
$-5.15
Balance Sheet
Current Ratio
5.51
Quick Ratio
4.54
Debt/Equity
0.17
Other
Beta (Volatility)
1.26
Does AVAV Have a Competitive Moat?
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🛡️ Narrow
Moat Trend
Eroding
Moat Sources
3 Identified
The moat in its core UAS business remains relatively durable due to specialized IP and defense-specific applications. However, the moat in its nascent and critical space/HAPS division is eroding due to execution challenges, goodwill impairment, and the significant contract termination, which could deter future partners or contracts.
Moat Erosion Risks
- •Failure to successfully re-win key government contracts, particularly in the space domain.
- •Increased competition or technological disruption from new entrants or larger defense primes.
- •Inability to overcome financial challenges (negative FCF, declining margins) that could impede R&D and strategic investment.
AVAV Competitive Moat Analysis
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AVAV Market Intelligence
Sentiment & Insider Activity
Social Sentiment
Bearish (due to dramatic stock price decline, contract termination, and lawsuit. High retail fear.)
Institutional Sentiment
Mixed (analysts raised targets post-Q3 earnings, suggesting long-term optimism, but the significant stock plunge indicates market's immediate negative reaction).
Insider Activity (Form 4)
No specific Form 4 filings for AVAV in last 90 days indicating buy or sell activity.
Options Flow
Normal options activity (no specific unusual options activity identified in the provided data).
Earnings Intelligence
Next Earnings
2026-06-23
Surprise Probability
High
Historical Earnings Pattern
Stock plunged dramatically after the Q3 FY2026 earnings miss and subsequent news, indicating extreme sensitivity to negative financial performance and strategic setbacks. Expect high volatility around future reports.
Key Metrics to Watch
Competitive Position
Top Competitor
KTOS
Market Share Trend
Gaining in core UAS/loitering munitions with strong product momentum; losing ground or at significant risk in the space division due to contract termination and impairment.
Valuation vs Peers
Difficult to assess precisely without specific peer multiples. However, AVAV's valuation is likely trading at a premium on a forward P/E given current negative profitability, but potentially at a discount on a long-term Price/Sales if the HAPS thesis materializes.
Competitive Advantages
- •Proprietary technology and expertise in unmanned aerial systems (UAS) and loitering munitions.
- •Established relationships and contract history with government defense agencies.
- •Potential first-mover advantage and long-term vision in High Altitude Pseudo-Satellite (HAPS) technology (though currently challenged).
Market Intelligence
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What Could Drive AVAV Stock Higher?
Near-Term (0-6 months)
- •Q4 FY2026 Earnings Report (expected June 23, 2026)
- •Updates on U.S. Space Force SCAR program recompete strategy
Medium-Term (6-18 months)
- •Resolution of investor lawsuit investigation
- •Signs of improved financial performance and positive Free Cash Flow generation
Long-Term (18+ months)
- •Material revenue generation and successful deployment of HAPS technology
- •Expansion of market share in advanced UAS and loitering munitions
Catalysts & Growth Drivers
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What's the Bull Case for AVAV?
- ✓
Successful re-securing of major space contracts and signs of recovery in the space division's profitability.
- ✓
Consistent positive Free Cash Flow generation and stabilization/improvement of gross and operating margins.
- ✓
Clear progress on the HAPS program's commercialization and adoption timeline.
Bull Case Analysis
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Competing with AVAV
See how AeroVironment Inc compares to related companies
| Company | Market Cap | DVR Score | P/E | Revenue | Profit Margin | Rev Growth | |
|---|---|---|---|---|---|---|---|
AeroVironment Inc AVAV | $9.1B | 3.8 | -42.2 | $1.6B | -13.9% | 15.7% | |
Caterpillar Inc CAT | — | 0.1 | — | — | — | — | Compare → |
Honeywell International Inc. HON | — | 1.5 | — | — | — | — | Compare → |
Kratos Defense and Security Solutions Inc KTOS | $14.5B | 5.2 | 592.1 | $1.4B | 1.6% | 21.9% | Compare → |
United Parcel Service Inc UPS | $81.3B | 0.1 | 14.3 | — | — | — | Compare → |
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FAQ
What is the DVR Score for AeroVironment Inc (AVAV)?
As of April 4, 2026, AeroVironment Inc has a DVR Score of 3.8 out of 10, placing it in the "Risk Trap" category. This score is generated by our AI-powered deep value analysis framework that evaluates growth potential, financial health, competitive moat, and risk factors.
What is the market capitalization of AeroVironment Inc?
AeroVironment Inc's market capitalization is approximately $9.1B. The company operates in the Industrials sector within the Aerospace & Defense industry.
What ticker symbol does AeroVironment Inc use?
AVAV is the ticker symbol for AeroVironment Inc. The company trades on the NMS.
What is the risk level for AVAV stock?
Our analysis rates AeroVironment Inc's overall risk as Aggressive. This assessment considers execution risk, market risk, financial risk, competitive risk, and regulatory risk. For a full breakdown, see the risk analysis section above.
What is the P/E ratio of AVAV?
AeroVironment Inc currently has a price-to-earnings (P/E) ratio of -42.2. This is below the market average, which could indicate the stock is undervalued or facing headwinds.
Is AeroVironment Inc's revenue growing?
AeroVironment Inc has reported revenue growth of 15.7%. The company is showing strong top-line momentum.
Is AVAV stock profitable?
AeroVironment Inc has a profit margin of -13.9%. The company is currently unprofitable.
How often is the AVAV DVR analysis updated?
Our AI-powered analysis of AeroVironment Inc is refreshed regularly to incorporate the latest financial data, market conditions, and news. The most recent update was on April 4, 2026.
Important Disclaimer – Not Financial Advice
Deep Value Reports is an independent research platform for educational and informational purposes only. We are not financial advisors, investment advisors, or licensed professionals. The analysis, scores, and information provided on this page for AVAV (AeroVironment Inc) should not be construed as personalized investment advice, a recommendation to buy or sell any security, or an offer to provide investment advisory services.
All investments involve risk, including the potential loss of principal. Past performance does not guarantee future results. Always conduct your own research, consider your financial situation, and consult with a qualified financial advisor before making any investment decisions.