AeroVironment stock initiated at Overweight by Cantor Fitzgerald on drone growth

Investing.com - Cantor Fitzgerald initiated coverage on AeroVironment (NASDAQ:AVAV) with an Overweight rating and a $335.00 price target on Tuesday. According to InvestingPro data, the stock is currently trading at high valuation multiples, with a P/E ratio of 153x and EV/EBITDA of 114x.

The research firm cited the company’s growth potential in Group 1-3 drones and expansion of munitions and air defense capabilities as key factors supporting its bullish outlook. Cantor Fitzgerald views price appreciation as a "multi-year journey" for the drone manufacturer. This outlook aligns with the company’s strong performance, having delivered a 47% return over the past six months and maintaining a healthy revenue growth of 14.5%.

The firm expressed particular optimism about AeroVironment’s recent Blue Halo acquisition, noting potential synergies between the organizations. Analysts highlighted ramping programs across munitions, counter UAS, and directed energy as fundamental strengths.

Cantor Fitzgerald believes AeroVironment’s high profitability in its scaling drone business, along with mix-shift maturation for Blue Halo programs and potential capital expenditure synergies, will benefit the company’s capital allocation process.

The research firm also noted that institutional skepticism around munitions and directed energy effects would likely be offset by "less risk-averse investors buying into growth visibility," with funding sentiment playing a significant role during what it described as a "flush budget cycle."

In other recent news, AeroVironment announced proposed public offerings totaling $1.35 billion, comprising $750 million in common stock and $600 million in convertible senior notes due 2030. The company plans to use the proceeds to repay existing debt and increase manufacturing capacity. These offerings are subject to market conditions and may not be completed as planned. Additionally, AeroVironment’s recent acquisition of BlueHalo has led to a strategic focus on expanding its product lines, notably the Switchblade munition system, which has garnered significant interest from NATO countries. RBC Capital has raised its price target for AeroVironment to $275, citing increased program opportunities and potential growth in the Switchblade’s annual run rate. Meanwhile, Goldman Sachs initiated coverage on AeroVironment with a Buy rating and a $301 price target, highlighting the demand for its products in military applications, particularly in the context of the Ukraine conflict. The firm anticipates AeroVironment will benefit from future U.S. Department of Defense programs and increased international defense spending. AeroVironment’s recent developments reflect its strategic initiatives to capitalize on growing defense needs globally.

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