BofA bullish on AeroVironment on U.S. drone push

Investing.com -- AeroVironment will benefit from Washington’s new push to expand military drone use, Bank of America said as it began coverage of the stock with a Buy rating and a $300 price target.

The brokerage pointed to U.S. defense secretary Pete Hegseth’s “Unleashing US Military Drone Dominance” a turning point that will boost procurement of low-cost, modular drones.

“We expect increased funding for UAS procurement and R&D, with a particular focus on drones that enable front-line modularity and interoperability,” BofA wrote.

It said AeroVironment’s approach of designing “plug and play” systems position it well for this shift.

The company has already seen its Switchblade drones deployed in Ukraine and has expanded its technology base through the recent acquisition of BlueHalo, which adds counter-drone, software, and other defense technologies.

BofA said the deal “broadens the company’s exposure to defense tech and opens the aperture to new funding streams.”

The bank acknowledged that AeroVironment will face new competition as the Pentagon accelerates approval of commercial drone makers, but said incumbency and proven capacity will be key advantages.

“We see AVAV’s technology suite, success of the Switchblade in Ukraine, and production capacity as key differentiators to maintaining and growing their market share,” the analysts said.

BofA set its price target at $300, about 10% above AeroVironment’s current share price of $272.

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