AeroVironment (AVAV), whose revenue jumped 80% since 2021, specializes in manufacturing drones used in warfare. Consequently, it’s not surprising that many of the firm’s Switchblade drones, used to attack enemy forces, have been widely utilized in Ukraine.
These drones dive into their targets and explode near them. Among the best selling versions of these products are the Switchblade 300 and the Switchblade 600. The Switchblade 300 can travel as much as 18 miles and stay over its target for up to 20 minutes, while the 600 can fly 24 miles and hover over targets for as much as 40 minutes.
The Switchblade 300 drones are just two feet long and weigh six pounds, while the 600 is 1.3 meters long, weighs about 22.7 kilograms and is equipped with an anti-tank guided missile warhead.
The success of the Switchblades are a key reason why the company’s revenue surged from $394.9 million during its fiscal year that ended in April 2021 to $716.7 million in its fiscal year that ended in April 2024.
Validated by a Huge Deal With the U.S. Military
In August, AeroViroment announced that it had obtained a five-year contract worth up to $990 million from the U.S. Army. Under the deal, the Army will receive an “indefinite” number of AeroVironment’s switchblades and provide them to its infantry soldiers.
The deal validates the effectiveness of the Switchblades and shows that the Army plans to heavily utilize them for many years to come.
Given the Army’s decision to use the devices, many if not most of America’s allies, in addition to Ukraine, will be interested in utilizing them as well. After all, if they’re good enough for the U.S., they will probably be more than sufficient for much smaller militaries that are less likely to have to engage in major combat.
Providing evidence for the latter thesis, the State Department in June authorized Taiwan to buy up to 720 Switchblade 300 drones valued up to $60 million. And last month, the Asian country signed a deal to purchase up to 1,000 drones from AeroVironment and Anduril Industries.
What’s more, speaking on AeroVironment’s fiscal first quarter earnings call held on Sept. 4, CEO Wahid Nawabi said that “Demand for Switchblade continues to rise both domestically and abroad.” Among the other allies that are utilizing the Switchblade, according to AeroVironment, are Lithuania, Romania, and Sweden.
And also boding well for the firm’s long-term outlook, the CEO added that “We’re confident that the LMS business is only at the beginning stages of this strong growth cycle, and we anticipate continued momentum beyond this fiscal year.”
AeroVironment’s Reconnaisance Drones
Last month, AeroVironment unveiled a new “electric vertical takeoff and landing drone. Known as the P550, the device was reportedly built to comply with the Army’s updated requirements for its unpiloted long-range reconnaissance needs, the company reported.
Nawabi stated that the product “features advanced AI and autonomous capabilities.” The P550 has “a maximum gross takeoff weight of up to 55 pounds (and) can carry up to 15 pounds of payload,” while it can travel for as much as five hours.
Financial Results and Valuation
In AeroVironment’s fiscal first quarter which ended in July, the company’s revenue jumped 24% versus the same period a year earlier to $189.5 million. However, its net income slipped to $21.167 million from $21.9 million in Q1 of the previous year. The decline was largely caused by signficantly higher sales, marketing, research and development expenditures in Q1 of this year compared with the same period a year earlier.
AeroVironment’s forward price-to-earnings ratio is 76 times. That’s well above the median level of its industrials sector which is 24.4 times.
