Drone Maker Stock Soars on Nearly $1 Billion U.S. Army Contract

AeroVironment Receives a $1 Billion U.S. Army Contract for Switchblade Drones

On Tuesday, the Department of Defense announced that AeroVironment had been awarded a $990 million contract for its Switchblade “suicide” drones. This contract aims to provide “an organic, stand-off capability to dismounted infantry formations capable of destroying tanks, light armored vehicles, hardened targets, defilade, and personnel targets.” The contract will run through August 2029.

Analysts Upgrade AeroVironment

Baird raised its rating on AeroVironment shares from “neutral” to “outperform” in response to this announcement, with a price target of 220, up from 161. The company said the SwitchBlade deal will enable substantial drone inventory levels and give product visibility through 2029.

Similarly, Alembic Global upgraded AVAV on Wednesday, giving the stock an “overweight” rating, up from a “neutral” designation. Analyst Pete Skibitski at Alembic Global set a price target of 216 for AVAV.

Switchblade Overview

The Switchblade is a tube-launched munition with small wings that can be flown like drones. It is designed to hit targets and detonate.

The Pentagon’s Replicator program has selected the Switchblade 600 as one of the systems to be fielded. This program aims to speed up the purchase and delivery of drones to the services, to field thousands of drones by August 2025.

AeroVironment was previously awarded a contract in December to fulfill the Army’s loitering unmanned systems-directed requirement and is delivering systems to the Army under that contract.

Financial Impact

In summary, this new contract will generate AeroVironment an extra $198 million in annual revenue over the next five years.

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