AeroVironment (NASDAQ: NASDAQ:AVAV), a manufacturer of unmanned aircraft systems, saw its price target raised by RBC Capital from $200.00 to $230.00.
The firm kept its Outperform rating on the stock, indicating a positive outlook. The adjustment comes in anticipation of the company's first-quarter fiscal year 2025 results, which are due to be released after the market closes on Wednesday.
The company's recent $990 million Army Indefinite Delivery, Indefinite Quantity (IDIQ) award is a key factor in the revised price target. RBC Capital suggests that investor attention may shift towards the potential for AeroVironment to increase its fiscal year 2025 guidance and the implications for fiscal year 2026 estimates.
The firm anticipates that the IDIQ contract, despite its uncertain order timing, will prompt an upward revision in the company's financial guidance.
RBC Capital expects sentiment towards AeroVironment to improve, which could be further bolstered by the company's upcoming earnings report. The firm notes that while the mix of orders under the IDIQ contract may put pressure on margins, the overall outlook for AeroVironment remains positive. The raised price target reflects this optimism and the anticipated growth in the company's financial performance.
The firm's statement highlighted the potential for AeroVironment to benefit from the sizable Army contract. "With the recent $990M Army IDIQ award, we believe much of the focus for investors is now on the potential upside to the FY25 guide and FY26 estimates," said the analyst from RBC Capital. They further commented on the expected guidance adjustment, "While timing of the orders under the IDIQ contract can be uncertain, we expect AVAV to raise its FY25 guidance."
In other recent news, AeroVironment has secured a significant contract with the U.S. Army for its Switchblade loitering munitions. The contract, valued at up to $990 million, represents the largest indefinite delivery, indefinite quantity (IDIQ) contract for both AeroVironment and its Switchblade product line. This contract is expected to contribute significantly to AeroVironment's revenues, potentially delivering up to approximately $200 million annually through August 2029.
In addition, the company reported a record-breaking fiscal year 2024 with revenues reaching $717 million, marking a 33% increase from the previous year. Analyst firm Baird upgraded AeroVironment from Neutral to Outperform, raising the price target to $220, influenced by the company's recent contract. BTIG and RBC Capital also expressed confidence in AeroVironment's growth prospects.
AeroVironment has also formed a new government relations team to enhance strategic engagement with the Department of Defense and Congress.
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