AeroVironment (AVAV) shares rose by 2% on Thursday after Raymond James upgraded the stock from Market Perform to Outperform, while setting a price target of $210. This comes after a significant decline of 55% since March, with shares closing at $141.22 on Wednesday.
Brian Gesuale, a five-star analyst at Raymond James, stated that the recent selloff has created a favorable risk/reward scenario. He noted that with new bookings starting to increase and backlog expected to grow, the market's expectations have been significantly revised.
Concerns regarding the SCAR program, which previously affected production revenue and EBITDA margins, are reportedly becoming less of an issue. The U.S. Army is currently negotiating with AeroVironment on the Enduring High Energy Laser (E-HEL) program, estimated to be worth around $500 million, which could substantially contribute to the company’s backlog.
Analysts predict that the funded backlog could see its first sequential increase in over a year, potentially rising close to 20% quarter over quarter. This growth would enhance revenue visibility leading into fiscal years 2027 and 2028.
Despite some analysts cutting their price targets, the overall sentiment remains positive. For instance, Bank of America reduced its target to $225 from $450, while Canaccord Genuity lowered it to $240 from $280. Nevertheless, these analysts maintained their Buy ratings, with the consensus on Wall Street still classified as a Strong Buy, supported by 15 Buy ratings and 2 Hold ratings, along with an average price target of $225.50 indicating nearly 60% upside.
Recent developments, including newer platforms such as the P550 and Red Dragon, are gaining traction, coupled with increased international demand. This growing sector continues to bolster the recovery narrative for AeroVironment.
This material is informational and not financial advice.
