Why AeroVironment Stock Is Skyrocketing This Week

Key Points

• AeroVironment received some good news this week regarding which countries it can sell its drones to.

• Following this news, the stock received a couple of buy ratings from analysts.

• Ultimately, AeroVironment's longer-term success hinges upon a successful integration of its 2024 Blue Halo acquisition.

• 10 stocks we like better than AeroVironment ›

Shares of up-and-coming defense contractor AeroVironment (NASDAQ: AVAV) are up 17% this week as of 11 a.m. ET on Friday, according to data provided by S&P Global Market Intelligence.

Most famous for its drones or unmanned aircraft systems (UAS), AeroVironment is quickly building out a full suite of defense offerings following its $4.1 billion acquisition of Blue Halo last November.

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This week, the company's shares are launching higher following an announcement from the U.S. State Department that the Trump administration plans to ease export restrictions for UAS makers such as AeroVironment.

Green lights and upgrades

The State Department's policy shift should help AeroVironment sell drones internationally to a handful of new countries. This upside -- paired with a proposed budget from the Pentagon to nearly double drone and counter-drone spending -- has the market taking note of the company's stock.

Image source: Getty Images.

Following this news, AeroVironment stock received a reiterated buy rating from an analyst at William Blair and a new outperform rating from Bank of America.

The Bank of America noted Secretary of Defense Pete Hegseth's "Unleashing U.S. Military Drone Dominance" memo as a critical component of AeroVironment's growth potential.

However, as promising as these developments may prove to be for the company over the next few years, longer-term potential may come from its Blue Halo acquisition.

By bringing Blue Halo's counter-UAS, space technology, and electronic warfare and cyber segments into the fold, management believes it quadrupled its total addressable market.

Now AeroVironment is home to both the platforms (drones or ground robots, for example) and the software (communications, command and control, and artificial intelligence and autonomy) it needs to lead its niche in the defense industry.

It's trading at 78 times forward earnings, however. Interested investors may want to buy across multiple purchase points.

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Josh Kohn-Lindquist has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AeroVironment. The Motley Fool has a disclosure policy.