As the conflict in the Middle East shows few signs of abating, it seems that a prolonged battle of attrition is in the cards between the two fronts, with the U.S. and Israel at odds with Iran. While the bombings have continued with missiles, drones have also taken center stage as an efficient and cost-effective method of inflicting damage.
Particularly, Iran has widely adopted drone technology in its combat strategy. With Iran's Shahed drones built at an estimated cost as low as $20,000 per unit, the U.S. and its allies are having to spend multiple times more just to shoot them down. However, one defense company seems to have found a cheaper solution to the problem.
AeroVironment's ‘60 Minutes’ of Fame
Featured on a recent installment of the popular CBS show 60 Minutes, defense contractor AeroVironment's (AVAV) laser technology is being considered by the U.S. government to neutralize Iran's drones. Purported to cost just $3 per shot, AeroVironment CEO Wahid Nawabi said, "It changes the economics on how we can actually defeat and defend against these targets that are now being deployed and produced by tens of thousands."
This is not without precedent. The company has also used its laser system, Locust, on the U.S.-Mexico border. Notably, the system has a detection range of seven miles, with AI being used to track target drones.
With AeroVironment's laser tech possibly offering an efficient counter to Iran's most potent answer in the war, let's look at what the company is all about.
About AeroVironment
Founded in 1971, AeroVironment is a defense technology company specializing in autonomous and robotic systems for military and government customers. Its core product categories include unmanned aircraft systems (UAS), loitering munitions, counter-drone and directed energy systems, space, cyber and communication systems, and finally autonomous and robotic platforms. AeroVironment is valued at a market capitalization of $10.77 billion.
AVAV stock is down 13% on a year-to-date (YTD) basis. This decline is primarly due to the termination of the Satellite Communication Augmentation Resource (SCAR) contract for the U.S. Space Force.
So, can the 60 Minutes coverage give AVAV stock a new lease on life? Amid a plethora of venerable defense names, what sets AeroVironment apart? Let's take a closer look.
AeroVironment's Strong Backlog
The most recent quarterly results from AeroVironment were a total miss, with both revenue and earnings falling short of expectations. However, that doesn't tell the whole story.
Revenue witnessed a sensational jump to $408 million in the third quarter of 2026 from $167.6 million in the year-ago period, aided by healthy year-over-year (YOY) growth rates of 99% and 367% for product sales and contract services to $277.8 million and $130.2 million, respectively. Meanwhile, EPS more than doubled to $0.64, although that was not enough to beat the consensus estimate of $0.68. Moreover, this was the third consecutive quarter showing an earnings miss from the company.
However, AeroVironment reported a strong backlog of $1.1 billion as of Jan. 31, 2026, higher than the $726.6 million backlog reported in April 2025.
On the other hand, the company continues to bleed cash flow from operations. Net cash outflow from operating activities jumped substantially to $173.9 million for the nine months ended Jan. 31, up from just about $1 million in the year-ago period. Yet, the company's healthy cash balance of roughly $290 million was much ahead of its short-term debt levels, alleviating liquidity concerns.
AVAV stock continues to trade at elevated levels, even after a weak start to 2026 in terms of share-price movement. The stock's forward price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF) multiples of 75.6 times, 13.5 times, and 41.1 times are all well above the sector medians.
Multi-Pronged Growth Drivers
Even though the 60 Minutes highlight of AeronVironment was its anti-drone capabilities, the company is much more than that.
Notably, AeroVironment brings substantial strengths in drone tech that reach far beyond its counter-drone solutions. The company maintains a commanding presence in autonomous platforms and loitering munitions, delivering field-tested systems including the Puma, JUMP 20, and the Switchblade series. Moreover, compared with newer, software-centric competitors, AeroVironment enjoys clear advantages in production scalability and entrenched sole-source relationships within the defense establishment.
Admittedly, agile startups can often move more quickly on software updates. But AeroVironment combines decades of hardware experience with sophisticated AI integration, enabling it to manufacture durable systems suited for high-threat environments at scale. Consequently, the financial outlook for this segment is highly favorable. Management recently established fiscal 2026 revenue guidance in the range of $1.85 billion to $1.95 billion.
Meanwhile, as part of its capacity expansion strategy, AeroVironment plans to significantly increase output of its Titan C-UAS product line, targeting a fourfold increase in manufacturing capacity during 2026 and a tenfold increase by 2030. The company is also reportedly preparing to triple production of Group 2 drones by fiscal 2027, driven by robust demand for cost-effective maritime defense solutions.
AeroVironment continues to serve as a trusted partner to the U.S. Army, as evidenced by two recent contract awards. In Q3 2026, AeroVironment received a $186 million order from the U.S. Army for Switchblade 600 Block 2 and Switchblade 300 Block 20 systems. This order falls under a five-year $990 million Indefinite Delivery, Indefinite Quantity (IDIQ) contract for lethal unmanned systems awarded in 2024. To meet anticipated demand for Switchblade platforms, the company is expanding manufacturing capacity at its facility in Salt Lake City, Utah, with the potential to support an additional $2 billion in annual revenue once fully operational. In December 2025, AeroVironment also secured a five-year $874.26 million IDIQ contract from the U.S. Army Contracting Command to facilitate foreign military sales. The agreement enables U.S. allies to acquire Group 1 through Group 3 UAS and counter-UAS systems from AeroVironment, along with related training and support services.
What Do Analysts Think of AVAV Stock?
Analysts remain cautiously optimistic about AeroVironment, giving AVAV stock a “Moderate Buy” consensus rating. The mean target price of $316.47 denotes potential upside of about 50% from current levels. Out of 20 analysts covering the stock, 15 analysts have a “Strong Buy” rating, two have a “Moderate Buy” rating, one has a “Hold” rating, and two have a “Strong Sell” rating.
On the date of publication, Pathikrit Bose did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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