AeroVironment Stock Faces Key Earnings Test as Analysts Remain Divided

AeroVironment (NASDAQ:AVAV) stock has underperformed the broader market and other companies in the Military Industrial Complex. It has dropped by 22% this year, while the S&P 500 Index has jumped by double digits. 

AeroVironment is Benefiting From Drone Demand

AVAV stock has dropped this year despite the ongoing demand for drone and anti-drone products as trends in warfare change. 

Its last earnings report showed that its revenue rose to $642 million, up by 30% from the same period a year earlier. Its full-year revenue jumped to $1.98 billion, with some contribution coming from its BlueHalo acquisition. 

AeroVironment’s adjusted EBITDA jumped to 22%, helped by higher sales. Its bookings jumped to $2.7 billion during the quarter.

Analysts expect the upcoming results to show that its revenue rose modestly in the first fiscal quarter to $459 million, with its EPS falling a bit from $0.32 to $0.30. Chances are that its earnings and revenues will be higher than what analysts expect because of the rising demand.

Benzinga data shows that analysts have a mixed outlook for the AVAV stock price. For example, KeyCorp, Citigroup, and William Blair recently reiterated their bullish outlooks. 

On the other hand, Citizens, Canaccord Genuity, and Piper Sandler slashed their estimates, citing its valuation and rising competition. The average estimate among analysts is $266, down sharply from $318, where it was three months ago. 

AeroVironment is still one of the most overvalued defense contractors, with its forward price-to-earnings ratio rising to 59. This figure is much higher than the industrial sector average of 24. It is also higher than other companies like Lockheed Martin and RTX.

AVAV Stock is Showing Some Bottoming Signs

Technicals show that the AeroVironment stock is bottoming, which may lead to a bullish breakout after earnings. It formed a double-bottom pattern at $137.76 and a neckline at $200, its highest level on July 2nd. 

The stock has already moved above the 50-day moving average, while the Relative Strength Index (RSI) has been in a slow uptrend. It has moved close to the overbought level of 70. 

Therefore, the stock will likely have a strong bullish breakout after its earnings on Monday. If this happens, it may rebound to the psychological level of $250. The alternative scenario is that it drops to the lower side of the channel at $137. 

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