AeroVironment Stock Surges: U.S. Army Gives Green Light to Fulfill $990 Million Order
AeroVironment (NASDAQ: AVAV) has recently received a significant boost as the U.S. Army has instructed the company to continue working on fulfilling a $990 million order, despite an ongoing protest of the award. This news has caused investors to cheer, leading to a surge in AeroVironment shares, which were up 11% as of 2:30 p.m. ET.
The U.S. Army’s decision to give the green light to AeroVironment is a significant development for the company, as it is a key supplier of small-to-midsized unmanned aerial vehicles (UAV) to the U.S. military and other customers. One of its flagship products, the Switchblade loitering munition, has played a crucial role in the Ukraine military’s conflict with Russia.
Last month, AeroVironment was awarded a new contract to produce more Switchblade UAVs. However, a protest was filed against the contract, leading to a review by the Government Accountability Office (GAO). Typically, work is suspended during such reviews. Still, in a regulatory filing, AeroVironment announced that the U.S. Army has lifted the stop-work order, allowing the company to proceed with fulfilling the initial $128 million delivery portion of the contract.
Investing in AeroVironment: Is it a Good Idea?
While the U.S. Army’s decision to allow AeroVironment to continue work on the contract is positive news for the company, investors should be aware that the GAO’s consideration of the protest is ongoing, and the award could potentially be overturned. Despite this uncertainty, the move indicates the importance the U.S. Army places on the Switchblade systems.
AeroVironment’s shares currently trade at about 60 times expected earnings, suggesting that much of the company’s growth potential may already be factored into the stock price. The protest, even if unsuccessful, had the potential to delay the fulfillment of the Switchblade contract and could have impacted future quarters. By lifting the stop-work order, the U.S. Army has helped mitigate some of that risk.
For long-term-focused investors willing to weather volatility, AeroVironment presents an intriguing growth opportunity. However, it is essential to understand that stocks with high valuations, like AeroVironment, can be sensitive to external factors. Therefore, investing in AeroVironment stock requires a strong stomach and a willingness to withstand market fluctuations.
Considerations Before Investing in AeroVironment
Before making any investment decisions, it’s crucial to weigh all the factors at play. The Motley Fool Stock Advisor analyst team recently identified the 10 best stocks for investors to buy now, and AeroVironment did not make the list. The stocks that did make the cut have the potential to deliver substantial returns in the coming years.
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In Conclusion
In conclusion, AeroVironment’s recent surge in stock price following the U.S. Army’s decision to allow the company to continue work on a $990 million order is a positive development. While there are risks involved, particularly with the ongoing protest of the contract award, AeroVironment remains a compelling growth opportunity for long-term investors.
Investors should carefully consider all factors before investing in AeroVironment stock, including the company’s valuation, potential risks, and market conditions. By staying informed and making well-informed decisions, investors can navigate the dynamic world of investing successfully.
