AeroVironment’s (NASDAQ: AVAV) December price contraction is a buying opportunity because of its position as a next-gen defense contractor, solid results, growth, guidance, analyst trends, and the institutions buying this stock like mad. The institutional activity is noteworthy because the group owns more than 85% of the stock, has been buying on balance quarterly in 2024, and the balance of activity is ramping higher. The balance of activity in the first two months of calendar Q4 is at a multi-year high with another month left to go, providing a powerful tailwind for the market. It is unlikely that these trends will end and more likely that this stock will quickly regain lift, resume the uptrend, and move to new highs.
What does AeroVironment do? It makes drones but, more importantly, AI-enhanced Loitering Munitions Systems that give Western powers an aerial advantage. LMS uses high-output electric systems to remain on station for hours, flying over targets using computer vision and other AI enhancements to observe and seek targets of opportunity. The drones either deliver a payload or are the payload. Among the drivers for AeroVironment's business today is increasing demand for next-gen systems, including AVAV’s AI retrofit kit for older models and global remilitarization. Military spending hit a fresh high in 2024 and is expected to grow in calendar 2025.
