Investors like AeroVironment’s drones, but its expensive stock price? Not so much.
AeroVironment (AVAV -7.54%) stock is wrapping up a volatile week, but ending on a weak note. Heading into the holiday Tuesday, the company known for its battery-powered small military drones announced another foray into hydrocarbons — a 215-pound drone that runs on petrol. Investors liked the idea of the company broadening its product array, and the stock hit a new all-time high closing price of $219. This momentum continued as the market reopened yesterday, and AeroVironment hit an intraday high of $224 — then stalled and began to fall.
Its stock plummeted 7.2% Thursday. As of 2 p.m. ET Friday, it’s down another 7.2%, bringing the weekly loss to 11.9%, according to data provided by S&P Global Market Intelligence.
AeroVironment’s new drone
AeroVironment’s new JUMP 20 uncrewed aircraft system (UAS) differs from the products that made the company famous as a defense contractor, the 4-pound Raven surveillance drone for example, or the 7-pound Kamikaze Switchblade. Weighing 200 pounds plus, it’s roughly 50x as big as a Raven.
Described as a medium vertical takeoff and landing (VTOL) fixed-wing unmanned aircraft, JUMP 20 derives from the company’s catapult-launched T-20 aircraft, adding vertical takeoff and landing capability so that it can operate without a runway. Instead of batteries like AV’s smaller drones, it uses a “heavy fuel” engine like the T-20, which can run on multiple hydrocarbon fuels, including gasoline. And it offers superior range to AeroVironment’s battery-operated drones — 115 miles, rather than just six for the Raven.
But there are drawbacks. JUMP 20 has an endurance of only 13 hours, versus 24-plus hours for the T20. It also can’t carry as much payload, only 30 pounds instead of 50 pounds for the T20.
Is AeroVironment stock a buy?
The U.S. Army has already agreed to buy at least one JUMP 20 drone, and may buy more to replace its fleet of Textron Shadow drones — but it remains to be seen how successful the product will be for AeroVironment, financially. It’ll need to be very successful to make AeroVironment stock look attractive at its current valuation of 83 times forward earnings.
With fourth-quarter 2024 earnings looming next week, investors are right to be cautious.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AeroVironment. The Motley Fool recommends Textron. The Motley Fool has a disclosure policy.