AeroVironment (AVAV 15.19%) stock tumbled 4.7% through 10:50 a.m. ET Tuesday, and it's not hard to figure out why ... although AV isn't making it easy, and you do have to do a little digging:
This morning, the U.S. Government "issued a stop work order on the Company's Other Transaction Agreement for the delivery of BADGER phased array antenna systems to support the Satellite Communication Augmentation Resource ("SCAR") program."
Image source: AeroVironment.
What are "BADGER phased array antenna systems"?
AeroVironment announced it won this contract in a big press release last September, clarifying that the U.S. Space Force Space Rapid Capabilities Office is its customer, and that BADGER will be used for "satellite tracking, telemetry, and control."
AV promised to "deliver the first BADGER unit to the Space Force in the coming months, with more units nearing completion for delivery in early 2026 to support full-scale overseas deployment."
What AV disclosed today
AeroVironment was less expansive in advertising its bad news. Instead of issuing a press release, AV disclosed the government action in an SEC 8-K filing. And AV spun the news as best it could:
"The stop work order allows for the parties to negotiate an amended agreement for the future of the SCAR program ... which amendment is expected to be a firm-fixed price agreement" -- so there's still hope the contract will continue.
NASDAQ: AVAV
Key Data Points
What does this mean for AeroVironment stock?
So what's the upshot here? BADGER's on the ropes. It may or may not survive.
How bad will it be for AV if BADGER does not resume? That's hard to say. The company hasn't disclosed the contract's value. The reference to a "firm-fixed price agreement" implies the original contract was "cost-plus," so even if the contract continues, it might generate smaller profit margins for AeroVironment.
