AeroVironment Soars, But Is It All Hot Air?

Shares of AeroVironment Inc. gained nearly 37 percent during early September after a flurry of deals for the drone maker. On Sept. 6, shares gained 14 percent after the company announced a deal to offer drone insurance for its Quantix model, a four-propeller drone that can be operated by an Android tablet. The insurance will be sold by DroneInsurance.com. Monrovia-based AeroVironment develops, manufacturers and tests its unmanned aircraft in Simi Valley. On Sept. 17, the company secured a nearly $6 million contract through NATO to sell its Raven military drones to the Portuguese army, boosting the stock price 4.5 percent. Meanwhile, in quarterly filings on Sept. 5, the company reported first quarter fiscal 2019 revenue of $78 million, an increase of 127 percent compared to the same quarter a year earlier. Net income totaled $27.3 million ($1.14 a share), compared to a net loss of nearly $5.9 million (-25 cents a share) for the same quarter a year ago. While those numbers show growth, they underwhelmed Joseph DeNardi, an analyst at Stifel in Baltimore who covers the company. “The bottom line is that we continue to see AeroVironment as being capable of generating revenue multiples higher than current levels within three to five years, but with shares trading at about $90 … it seems like most, if not all, of that upside is priced in,” DeNardi wrote in his report. “As a result, we maintain our Hold rating.” DeNardi noted that the company has a robust pipeline for growth opportunities, but management reiterated its previous guidance along with the quarterly release, implying no big opportunities or revenue increased on the near horizon. “We don’t view results as a significant positive catalyst but more so in line with expectations,” his report stated. DeNardi also discussed AeroVironment’s dependence on U.S. military spending for its revenue. The company has made efforts to diversify its customer base. For example, the drone insurance deal aims primarily at farmers who can use the Quantix drone to survey cropland. “AeroVironment’s commitment to helping growers gain insights that can improve operational efficiencies, spot crop health issues faster and improve profitability shines through with the Quantix drone,” Jeff Rodrian, director of AeroVironment Commercial Information Solutions, said in a statement. “We are excited to work with an innovative insurance solution provider like DroneInsurance.com, whose dynamic offerings match our mission to provide the actionable intelligence our customers need.” While AeroVironment’s closing share price jumped from $87.50 on Sept 5 to $119.83 on Sept. 18 – a gain of 36.9 percent – it has trended lower since then. Shares closed Sept. 26 at $108.85.