Why AeroVironment Stock Just Went Up 16.5%

AeroVironment (AVAV 13.39%) the stock took off like a rocket Wednesday morning, up 16.5% by 10:15 a.m. ET after the Pentagon announced the company’s largest-ever contract win.

The news led Tuesday night’s press release listing the largest Defense Department contracts awarded that day: $990 million to AeroVironment “to provide an organic, long-range capability to dismounted infantry formations capable of destroying tanks, light armored vehicles, hardened targets, parades and personnel objectives’.

What AeroVironment won

Of course, that language is a bit vague. What he’s probably referring to, though, is the Pentagon’s purchases of Switchblade 600 “rogue munition systems” (aka, kamikaze drones). Featuring “high-precision optics, over 40 minutes of loitering and an anti-armor warhead to engage larger, hardened targets at longer ranges,” this drone appears tailor-made for the mission described in the Pentagon press release.

$990 million is a lot of money. Based on data from S&P Global Market Intelligence, that’s 38% more revenue than AeroVironment received for every product and service sold last year combined. But it’s important to put this news in context: This contract will be fulfilled over the next five years, so you definitely need to divide that number by five.

In other words, this contract gives AeroVironment an additional $198 million in annual revenue over the next five years.

Is AeroVironment Stock a Buy?

This is still pretty great news for AeroVironment shareholders. Adding $198M to the $717M AV accumulated over the past year implies a 28% sales growth rate on top of whatever growth it was going to have before winning this contract. (Hint: For 2025, S&P data forecasts the company’s sales growth to be about 14%).

In short, the AV growth rate probably multiplied from 14% to 42% — all because of one contract. Of course, trading at a valuation of 8.2 times trailing sales and roughly 99 times trailing earnings, AeroVironment stock still looks expensive to me.

But thanks to this contract, the stock looks less expensive today than it did yesterday.