AVAV Snaps 2-Day Losing Streak: Stock Rises In Overnight Trading, Wall Street Says Sell-Off Overdone

Drone stocks had witnessed a surge from the U.S. and Israel attacking Iran, but investors were concerned about AVAV losing steam following the SCAR Program opening up for bidding again.

• Jefferies said that the stock's decline appears overdone, given multiple growth drivers and other opportunities in the business.
• The stock closed Monday more than 17% lower after news that the U.S. Space Force reopened the bid for the SCAR Program.
• Earlier on Monday, the CNBC Mad Money host had noted that AVAV stock was a cheap buy and that the company could be the drone maker that the U.S. government would likely favour more.

Shares of AeroVironment Inc. jumped more than 3% during overnight trading on Monday, snapping a two-day losing streak as investor concerns swirled following the U.S. Space Force's plan to reopen its Satellite Communications Augmentation Resource program (SCAR) for bidding.

In January, the company said that, on mutual agreement with the U.S. Government, which issued a stop-work order on the company's Other Transaction Agreement for the delivery of BADGER phased array antenna systems to support the SCAR program.

AeroVironment said that the stop-work order allows the parties to negotiate an amended agreement for the future of the SCAR program under new requirements, which would include a simpler, fixed-price design.

The company designs and manufactures battlefield systems across air, land, sea, space, and cyber domains, including loitering munitions, autonomous robotic systems, unmanned aerial vehicles (drones), and counter-unmanned aircraft systems.

Wall Street Finds Sell-Off Overdone

Jefferies reiterated its ‘Buy’ rating on the stock, according to TheFly, and said that there was a potential loss of about $100 million in annual revenue, or roughly 5% of AeroVironment's sales, resulting from the loss of the SCAR Program. The firm added that this creates near-term uncertainty.

However, Jefferies said the stock's 48% decline appears overdone given multiple growth drivers and other opportunities in the business, with clarity expected only when a contract resolution or a new award emerges.

BTIG on Monday also noted that the AeroVironment unit Blue Halo had won the SCAR Program in 2022, and the firm still believes the company is in a strong position to capture future phased array demand. BTIG said the intraday pullback "appears overdone" for a contract initially expected to account for about 6% of annual sales.

What Reversed Monday’s Moves?

The stock on Monday closed over 17% lower after the news of the U.S. Space Force reopening the bid for the SCAR Program, erasing the earlier gains from the day when drone stocks saw an increase from the U.S. and Israel attacking Iran.

The attacks on Iran by the U.S. and Israel in a coordinated strike have resulted in the Middle East countries such as Qatar, Saudi Arabia, and the UAE also falling victim to Iran’s missiles and drone attacks.

Earlier on Monday, the CNBC Mad Money host had noted that AVAV stock was a cheap buy and that the company could be the drone maker that the U.S. government would likely favour more. The stock had jumped nearly 16% before reversing and falling.

How Are Stocktwits Users Reacting?

Retail sentiment on AeroVironment jumped to ‘extremely bullish’ from ‘bullish’ territory a week ago, with message volumes at ‘extremely high’ levels, according to data from Stocktwits.

A bullish user on Stocktwits said they bought more shares after the fall.

In the last 24 hours, retail message volumes on the stock jumped a whopping 7,380%, and the ticker saw a more than 4% spike in followers on Stocktwits.

Another bullish user on the platform noted that the U.S. and Israel's attack on Iran should help with increasing the company’s revenue guidance.

Shares of AeroVironment have gained nearly 47% in the last 12 months.

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