AeroVironment (AVAV): Assessing Valuation as $499M Air Force Contract and Puma LE Upgrades Boost Growth Story

AeroVironment (AVAV) has landed a 10-year, $499 million contract with the U.S. Air Force Research Laboratory focused on electromagnetic spectrum survivability. The announcement, combined with key drone system upgrades, has sparked renewed investor attention.

See our latest analysis for AeroVironment.

On the heels of its new $499 million Air Force contract and Puma LE drone enhancements, AeroVironment’s share price has gained clear momentum. Today’s move caps a stretch in which the company has outperformed many peers. While 1-year total shareholder returns stand at just under 1%, recent events have revitalized investor optimism and helped shift the focus back to AeroVironment’s longer-term growth narrative.

If today’s defense contract sparked your curiosity, you may want to see which other aerospace and defense names are showing fresh signs of strength. Check out See the full list for free.

Yet with shares surging after a wave of analyst upgrades and major contract wins, investors now face a key question: does AeroVironment remain undervalued, or has the market already priced in its next phase of growth?

Most Popular Narrative: 13% Overvalued

AeroVironment’s most widely followed valuation narrative puts fair value at $331.67, which is below the last close of $374.64. The narrative lays out ambitious growth plans, but the market may already be anticipating the upside.

The company's strategic focus on developing modular, interoperable, and software-defined platforms, including the newly launched AV Halo open software ecosystem, directly aligns with the accelerating adoption of AI-powered autonomy and network-centric warfare. This enables future premium pricing, increased service revenues, and gross margin expansion as these high-value platforms are deployed at scale.

Read the complete narrative.

Curious what kind of future earnings and margins justify such a premium? The core of this narrative is a bold leap in profit trajectory—a leap that could redefine sector expectations. Explore which performance assumptions drive this valuation and why analysts think the growth story is just beginning.

Result: Fair Value of $331.67 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, unexpected integration hurdles from recent acquisitions or shifts in U.S. defense priorities could disrupt AeroVironment’s growth path sooner than many analysts expect.

Find out about the key risks to this AeroVironment narrative.

Build Your Own AeroVironment Narrative

If you see the numbers through a different lens or want to challenge the consensus, the platform lets you test your own ideas in just a few minutes. Do it your way

A great starting point for your AeroVironment research is our analysis highlighting 1 key reward and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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