AVAV Stock Dominating in the Era of Drones

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AeroVironment Stock Is En Route to Higher Gains

Technology has transformed our lives. Not only for civilians, but for soldiers as well.

Drones are the latest examples of such ground-breaking technologies. Not only do they help in surveillance and precision targeting, but they also help minimize collateral damage in combat. And this is just one of the many applications of this technology.

A leading player in this space is AeroVironment, Inc. (NASDAQ:AVAV). The company is a major drone supplier for both military and commercial applications. Drones are basically flying robots. They are also known as unmanned aerial vehicles (UAVs) or unmanned aircraft systems (UAS).

The demand for UAS has been going up over the last few years.

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Drones used to be mostly associated with the military, which uses them for intelligence gathering and as a weapons platform.

However, there are also many commercial applications for this technology. For example, drones working with sensor networks can help monitor land and crops. This would result in improved yields. This type of farm management is called precision agriculture.

According to the recent report by MarketsandMarkets Research Private Ltd., the unmanned aerial vehicle drone market is likely to grow from $17.8 billion in 2017 to $48.9 billion by 2023. This translates into a compound annual growth rate (CAGR) of 18.3% during the forecast period. (Source: “Unmanned Aerial Vehicle (UAV) Drones Market worth 48.88 Billion USD by 2023,” MarketsandMarkets, last accessed June 28, 2018.)

Moreover, military drones will grab a major piece of this market. Drones help the military with border security and marking targets. The U.S. military has been successfully using drones for many years now.

AeroVironment is well positioned to gain from this trend, which points toward higher AeroVironment stock prices in the coming years.

The company sells the majority of its UAS and related services to organizations within the United States Department of Defense (DoD), including the U.S. Army, Marine Corps, Special Operations Command, Air Force, and Navy.

AeroVironment is one of the top suppliers of drones to the DoD, and the new orders have been pushing AVAV stock higher.

The significance of UAS for the military has been growing quickly, and it does not show any signs of fatigue. AeroVironment stock should continue to grow further as the demand for these drones is buoyant, and the company maintains its leading position with the U.S. DoD.

Life is full of uncertainties, especially for a soldier. AeroVironment is a company that minimizes this uncertainty.

It develops amazing technologies to better protect the troops, which gives them the confidence to proceed. With their military drones, the army can monitor the battlefield accurately and neutralize the enemy.

AVAV stock has been in the limelight this week because the company announced its fourth-quarter and full fiscal 2018 results on June 26.

For fiscal-year 2018, AeroVironment’s revenue grew by 18% to touch $271.0 million. The company also reported a record funded backlog of $174.0 million, an increase of 146%. (Source: “AeroVironment, Inc. Announces Fiscal 2018 Full-Year and Fourth Quarter Results,” BusinessWire, June 26, 2018.)

However, AVAV stock was briefly hit by lower-than-expected revenue guidance for fiscal-year 2019. But this weakness did not last long. And the reasons are not hard to fathom.

After the initial hit, the stock price gained about seven percent in the last trading session. Short-term movement aside, what is more interesting is the potential of the business.

The company has years of growth ahead. AeroVironment is focused on areas like robotics, sensors, and connectivity. These are the keys to tapping large global markets like defense and telecommunications.

Moreover, the company remains a Tier 1 supplier to the U.S. Army and one of the top suppliers to the U.S. DoD. With the increasing defense budget and growing significance of drones, the future appears bright for AeroVironment stock.

In addition, the company has been expanding its commercial offerings, which include artificial intelligence and data processing capabilities.

The optimism surrounding AVAV stock has been going up. This helped the stock gain more than 80% over the last year. The following chart shows this phenomenal rise.

avav stock chart

Chart courtesy of StockCharts.com

Analyst Take

AeroVironment, Inc has enjoyed a strong position as one of the top suppliers of drones to the U.S. DoD. With the growing popularity of drones, the number of applications is increasing not only in the military, but in the commercial space as well.

AeroVironment has a solid presence in a growing market, and this makes the case for higher AVAV stock prices stronger.