Strong Market Environment for AeroVironment

Written by GSCR Staff   
Thursday, 14 July 2016 05:33

In Monday’s Goldman Guide we had a lengthy discussion on the changing market dynamics prevalent today. With all the chaos and violence here in the U.S. and abroad we have strong convictions about defense stocks over the next year.

We are highlighting a new pick today in the small cap space, AeroVironment, Inc. (NASDAQ – AVAV - $27.60). Below is the one-year chart that illustrates the stock is coming off of a 52-week bottom in October and it may be time to buy again on a dip from a relative high of $32.44 a little over a month ago.

AVAV 1-Year Chart

(Source: www.otcmarkets.com)

MM.07.14.16.AVAV-1yr

AeroVironment Inc. designs, develops, produces, supports, and operates unmanned aircraft systems (UAS) and efficient energy systems (EES) in the United States and internationally. The Company offers small UAS products to deliver intelligence, surveillance, and reconnaissance; and communications, such as real-time tactical reconnaissance, tracking, combat assessment, and geographic data to the small tactical unit or individual operator. Its small UAS wirelessly transmit critical live video and other information to a hand-held ground control unit enabling the operator to view and capture images; ground control systems allow the operator to control the aircrafts; and tactical missile systems designed to be reusable for flights under normal operating circumstances and can be recovered through an autonomous landing feature that enables a controlled descent to a designated location. The Company also provides spare equipment, alternative payload modules, batteries, and chargers; repair, refurbishment and replacement, training, and customer support services to small UAS; turnkey mission services; and contract engineering services. In addition, it offers electric vehicle charging systems, services, and related solutions for plug-in passenger and fleet vehicles; PosiCharge industrial electric vehicle charging systems for electric material handling vehicles and airport ground support equipment; and power cycling and test systems for developers and manufacturers of electric vehicles, as well as battery packs, electric motors, and fuel cells. The Company sells EES products directly through sales force; and through retailers, resellers, industrial battery and lift-truck dealers, and distributors and representatives. It serves the U.S. Department of Defense, including the U.S. Army, Marine Corps, Special Operations Command, and Air Force, as well as commercial, consumer, and government customers.

Let’s examine the numbers for AVAV. First, our crucial P/E comparison. The forward P/E of 50 versus the trailing P/E of 71 on 7% CAGR on revenue over the next two years according to Wall Street consensus. Next, our cash versus debt picture looks extremely positive as well. As of the end of April 2016, AeroVironment had $228 million cash on hand with only $840,000 in debt. Finally, back to the technical front, a short float of 5.7% indicates strong conviction on the buy side.

As we stated in this week’s Guide, we believe the 2016 Presidential Election will be inconsequential when it comes to increased spending on defense and related technologies. AeroVironment has an established brand with solid products to benefit from this market growth. Look for AVAV to surpass the 52-week high and get back up to $35 by the end of the year.

Have a great day!

Goldman Small Cap Research is not affiliated in any way with Goldman Sachs & Co.

It is important to note that while we may track performance separately, we utilize the same coverage criteria in determining coverage of all stocks in both research formats. Please view the company’s individual disclosures for each engagement, which can be found in each company-specific report. All information contained in this blog, newsletter and in our reports were provided by the Companies or generated from our own due diligence. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence. Analysts are compensated on a per report basis and not on the basis of his/her recommendations.

The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Goldman Small Cap Research did not make an independent investigation or inquiry as to the accuracy of any information provided by the Company, or other firms. Goldman Small Cap Research relied solely upon information provided by the Company through its filings, press releases, presentations, and through its own internal due diligence for accuracy and completeness. Such information and the opinions expressed are subject to change without notice. A Goldman Small Cap Research blog, report, note, or newsletter is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed.

This blog does not take into account the investment objectives, financial situation, or particular needs of any particular person. This blog does not provide all information material to an investor’s decision about whether or not to make any investment. Any discussion of risks in this presentation is not a disclosure of all risks or a complete discussion of the risks mentioned. Neither Goldman Small Cap Research, nor its parent, is registered as a securities broker-dealer or an investment adviser with FINRA or with any state securities regulatory authority.

ALL INFORMATION IN THIS BLOG, REPORT OR NEWSLETTER IS PROVIDED “AS IS” WITHOUT WARRANTIES, EXPRESSED OR IMPLIED, OR REPRESENTATIONS OF ANY KIND. TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE FOR THE QUALITY, ACCURACY, COMPLETENESS, RELIABILITY OR TIMELINESS OF THIS INFORMATION, OR FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THE USE OF THIS INFORMATION BY YOU OR ANYONE ELSE (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF OPPORTUNITIES, TRADING LOSSES, AND DAMAGES THAT MAY RESULT FROM ANY INACCURACY OR INCOMPLETENESS OF THIS INFORMATION). TO THE FULLEST EXTENT PERMITTED BY LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE TO YOU OR ANYONE ELSE UNDER ANY TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY, PRODUCTS LIABILITY, OR OTHER THEORY WITH RESPECT TO THIS PRESENTATION OF INFORMATION.

For more information, visit our Disclaimer: www.goldmanresearch.com

Add comment
  • No comments found