After years of ups and downs, AeroVironment, Inc. (NASDAQ:AVAV) appears to be firing on all cylinders. The company's drones are growing in both military and commercial applications and its electric vehicle (EV) chargers are being adopted by a wider range of automakers. The stock is up 119% in the past year as a result. 

What doesn't make sense with this company is why drones and EV chargers are in the same business. Both business segments could benefit from some focus and their own financing sources, which is why I think it's time to break them up. 

BMW TurboCord.

Image source: Aerovironment.

Drones can easily stand on their own

AeroVironment's business is really driven by drones, known as the unmanned aircraft systems (UAS) division. In fiscal 2017, UAS revenue was up 52.4% to $115.7 million and accounted for 92.3% of the company's overall revenue. Gross margin jumped 61.2% to $56.3 million. And a vast majority of the company's expected $280 million to $300 million in revenue for fiscal 2018 will be from UAS sales. 

If you own shares of AeroVironment, it should be for the exposure to drones -- the EV charging business shouldn't really play much of a role in the investment thesis because it's such a small percentage of sales. But it could be a valuable business on its own. 

EV chargers could be a big business

AeroVironment has quietly built a nice business providing EV chargers to commercial operators and car manufacturers. It has been chosen by companies like BMW, Ford, the Chevrolet division of General Motors, Nissan, Fiat, and more to provide charging solutions, gaining particular traction with the TurboCord. As more EVs are introduced, the sales of chargers should naturally increase. AeroVironment projected that globally the home charger market alone could be worth $1.8 billion annually. 

Table showing Aerovironment's estimate of EV charger market.

Image source: Aerovironment's investor presentation.

But that's not the only charging business AeroVironment is in. The company sells chargers to commercial users and has built the West Coast Electric Highway charging stations that allow EV owners to travel up and down Washington and Oregon for a fee of $7.50 per fast-charging session and $4.00 per Level 2 charging session. 

One of the key challenges for the EV business will be building a national charging network with thousands of stations and hundreds of thousands of stalls. Automakers (outside of Tesla) haven't shown an interest in building the network, and utilities who have tried haven't been very successful. Companies like ChargePoint and Plug Share have done a good job aggregating charger locations, but aren't exactly equipped to rapidly build easily accessible charging stations for fast charging similar to Tesla's Supercharger network. AeroVironment could find financing and build that network if it was independent, but would likely have a hard time building it in the shadow of the drone business. 

Allowing chargers to be their own stand-alone business, or partnering with a company who could help finance the network, could be a huge business in and of itself. 

Better apart

I think the drone and EV charging business both have incredible potential. But together they may hinder each other's growth as they fight for the limited capital available at AeroVironment. It's time to separate these two unrelated businesses and let them flourish on their own. 

Travis Hoium owns shares of AeroVironment. The Motley Fool recommends AeroVironment. The Motley Fool has a disclosure policy.