Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Dronemaker AeroVironment Rose 18.6% in March

By John Bromels – Apr 7, 2020 at 11:56AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The military contractor's guidance impressed the stock market, but it was mostly a beneficiary of good timing.

What happened

Shares of unmanned aerial vehicle (UAV) manufacturer AeroVironment (AVAV -5.07%) rose 18.6% in March, according to data provided by S&P Global Market Intelligence. It was one of the rare stocks to post a gain during the month, when an oil price drop and coronavirus fallout caused the S&P 500 to fall by 12.5%.

So what

AeroVironment manufactures different types of military drones and is constantly competing for lucrative contracts with the U.S. government and foreign customers. Its shares tend to be pretty volatile, and they certainly bounced around quite a bit in March. 

Aerial drones fly over a building.

Image source: Getty Images.

In the three days after the company reported a surprise Q3 2020 net loss on March 3, shares actually rose by 14.1% because CEO Wahid Nawabi raised the company's FY2020 guidance by $0.20 per share to a midpoint of $1.65 per share. The timing was fortuitous because the subsequent oil price collapse caused shares to tumble, and coronavirus fears routed the whole market (AeroVironment included) just three days later, on March 12.

The company's shares popped after news broke on March 17 that it was teaming up with fellow UAV maker Draganfly to market AeroVironment's Quantix Mapper system, but they tumbled again the next day as more bad coronavirus news hit. Finally, they soared to end the month up 18.6% on no apparent news whatsoever.

Now what

Volatility has been the name of the game with AeroVironment, shares of which have ranged from less than $50 per share to $120 per share over the last three years. Sometimes, like in March, that volatility pays off for investors. But anyone who buys into this fast-moving tech sector should expect a lot of share price movements. 

It's worth noting that on April 1, the stock suffered an 11.42% drop. If AeroVironment's positive earnings news had come at the end of February, and March had ended a day later, the company's shares would have posted an 11% drop for the month. 

Even with its share-price changes, AeroVironment trades -- as usual -- at a pretty high multiple of more than 46 times earnings. Right now, though, the share price is near its two-year lows, which means if you're bullish on AeroVironment and think it can maintain its technology edge in the drone space, now isn't a bad time to consider buying in.  

John Bromels has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends AeroVironment. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

AeroVironment Stock Quote
AeroVironment
AVAV
$79.15 (-5.07%) $-4.23

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
339%
 
S&P 500 Returns
109%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/06/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.