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USA: A Fresh Look at AeroVironment

It’s been a tough start to the year for AeroVironment (Nasdaq: AVAV ) . The maker of drones and electric vehicle chargers reported a disappointing quarter, and has questions hanging over it about how fast its two major markets will grow.

But, since I usually like to buy stocks when they’re down, I thought it was time to take a fresh look at AeroVironment and see if it was a buy once again.

Attack of the drones
AeroVironment’s biggest business, by far, is making unmanned aircraft for the military, from the Wasp, just over two feet in length, to the Global Observer, which can fly at 60,000 feet for seven straight days.

These unmanned aircraft are an integral part of our current military campaigns, but they’re also what led to the disappointing numbers last quarter. The unmanned aircraft systems division, known as UAS, saw revenue fall 20% to $57.2 million. Management said this was partially due to a $20 million order that wasn’t cleared until the fiscal fourth quarter, but it was surprising nonetheless.

Long-term, I don’t think this division will be AeroVironment’s biggest driver, with wars winding down and competition increasing from big players. Lockheed Martin (NYSE: LMT ) and Boeing (NYSE: BA ) are also building unmanned aircraft, so the upside becomes somewhat limited for AeroVironment.

Electric vehicles are here, sort of
Depending on whom you ask, the electric vehicle market is either growing like gangbusters or extremely disappointing. The facts say that some electric vehicles are selling, but a widespread adoption by the American public is probably years away.

For AeroVironment, this means that its electric vehicle chargers are selling, but we shouldn’t get our hopes up too high. The division’s sales grew 16% in the most recent quarter, a nice level of growth, but nothing to write home about.
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