Why AeroVironment Stock Jumped 18% in October

Shares of AeroVironment (NASDAQ: AVAV), the maker of drones for military and commercial use, were moving higher last month on a positive analyst response to its investor open house at the end of September and after the company signed a major contract with the U.S. Air Force.

A round of applause from Wall Street followed the open house and the Air Force announcement, with several analysts raising their price targets on the drone stock.

The company also launched a new electric vertical takeoff and landing (eVTOL) platform, but fell after comments from Treasury Secretary Scott Bessent about defense companies investing more in their businesses and accelerating deliveries.

Image source: Getty Images.

By the end of the month, the stock had finished up 17.5%, according to data from S&P Global Market Intelligence. As you can see from the chart below, the stock popped in the first week on the open house and the Air Force contract, and then pulled back on the comments from the Treasury Secretary before holding steady over the second half of the month.

AVAV data by YCharts

What's happening with AeroVironment

AeroVironment kicked off the month with a bang after the company won over the analyst crowd with its Open House on Sept. 30.

Among the information it shared was a plan to push its addressable market to at least $75 billion by fiscal 2030, and reinforced its multi-pronged business model, which includes lasers, space technology, defensive systems, AI-powered software, and more.

Several Wall Street analysts raised their price target for the stock in the wake of that event, noting strong order momentum and a growing addressable market.

The other big news with AeroVironment at the beginning of the month was that it won a 10-year, $499 million contract from the Air Force Research Lab.

The stock jumped 10% on the news on Oct. 1, and continued to climb there, surging over the first week.

The other major catalyst was comments from Treasury Secretary Scott Bessent saying that the government may prod defense companies it works with to get more aggressive in fulfilling orders, rather than spending money on share buybacks.

AeroVironment isn't at the stage where it would be doing buybacks, but defense stocks fell broadly on the news. AeroVironment fell 4% on Oct. 15 and continued to decline from there.

What's next for AeroVironment

Given the excitement around eVTOL and drone stocks, AeroVironment seems well-positioned for further gains as the company is generating material revenue and growing rapidly.

It won't deliver its next earnings report until Dec. 9, but analysts are expecting revenue to jump 147% to $466.2 million, driven by the BlueHalo acquisition, and for adjusted earnings per share to jump from $0.47 to $0.80.

That's a good sign that the stock could continue rewarding investors going forward.

Jeremy Bowman 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.