Why Did AeroVironment Stock Drop Today?

AeroVironment (NASDAQ: AVAV) banal tumbled 4.6% done noon ET Friday connected nary evident atrocious news. Actually, the contrary: AeroVironment had fantabulous quality conscionable yesterday.

For $186 million, the U.S. Army volition bid an unspecified fig of AV's Switchblade 600 Block 2 and Switchblade 300 Block 20 loitering munition systems equipped with explosively formed penetrators (EFP).

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AeroVironment investors made the logical prime and bid up this shaper of subject drones 1.7% yesterday. But contiguous they're taking that wealth backmost -- and more. As of this writing, not lone is AeroVironment banal beneath wherever it traded the time earlier the declaration was announced; it's really trading backmost adjacent levels past seen mid-month.

But why?

Partly, it's astir apt due to the fact that yesterday's declaration announcement doesn't really impact AeroVironment getting immoderate "new" wealth from the Army.

As the institution advised, the $186 cardinal bid is portion of a erstwhile $990 cardinal Pentagon indefinite delivery, indefinite quantity (IDIQ) grant that AV received successful 2024. The grant does confirm the Army's "confidence successful the adjacent improvement of the Switchblade household and its relevance to modern, contested battlefields," arsenic AV Senior VP of Loitering Munitions Brian Young asserted.

But it doesn't truly adhd thing to aboriginal gross oregon aboriginal profit.

That's 1 crushed investors' enthusiasm for AeroVironment banal whitethorn beryllium fading. A 2nd crushed is valuation.

Priced astatine $248 a stock and with an $18 cardinal marketplace capitalization, AeroVironment sells for a pricey 150 times trailing net close now, and for a price-to-sales ratio of 10.9. That's an highly expensive valuation for a defence banal -- arsenic I've antecedently explained -- starring maine to reason that investors are truly selling disconnected AV banal for conscionable 1 reason:

It costs excessively much.

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