Today's surge in AeroVironment's share price can be attributed to...
Shares of AeroVironment (AVAV) saw a 6.7% boost between 10:20 a.m. ET and now, despite lacking any significant upgrades, earnings announcements, or other positive news. This surge in share price can be attributed to the widespread reports of unidentified flying objects (UFOs) along the U.S. East Coast, stretching as far inland as Ohio.
America is currently swarmed with drone sightings, and with AeroVironment being America's most recognized manufacturer of military drones, it stands to benefit from this heightened excitement.
A drone-tastic scenario
As per recent statistics from NBC News, drones, potentially sourced from countries like China and Russia, or even extraterrestrial in origin, have been reported from as far south as Florida, as far north as New York, and as far west as Ohio. The Internet is abuzz with speculation, some proposing an Iranian drone "mothership" situated on the East Coast, launching drones on a nightly basis.
However, the Pentagon has denounced these claims. Nevertheless, people's concerns and fascination with the story have further fueled the interest in a leading drone stock like AeroVironment.
The investment dilemma
Despite this surge in interest, whether AeroVironment is worth investing in is still up for debate. Only two weeks ago, AeroVironment reported a mere 4% sales growth, accompanied by a nearly 60% decrease in earnings. Despite this, the stock still commands a price tag exceeding 90 times earnings, which for a 4% grower with declining earnings, is quite pricey.
Instead, one could consider investing in defense stocks focused on countering drone threats. For instance, RTX, known for its radar technology used to detect drones during flight, or Lockheed Martin, which produces the Morfius "counter-UAS" system to combat drone swarms.
Both companies offer more practical solutions to the drone threat and are more financially viable options with P/E ratios of 33 and 18, respectively, significantly lower than AeroVironment's.
In light of the increasing drone sightings across the United States and the role of AeroVironment in manufacturing military drones, investors might consider diversifying their portfolios to include defense stocks that focus on countering drone threats. For instance, RTX, famous for its drone detection radar technology, or Lockheed Martin, which produces the Morfius "counter-UAS" system, could be more financially viable options compared to heavily valued drone stocks like AeroVironment. Despite the recent surge in interest due to UFO sightings, careful consideration of a company's financial performance and growth potential is crucial when making investing decisions.
