Why Wall Street Still Sees Massive Upside for AeroVironment Stock

Key Points

• AeroVironment's fiscal Q4 revenue surged 133.3% year-over-year, with adjusted EPS of $1.84 coming in roughly 2,500 basis points above forecasts.
• AVAV shares rose 20% following the FY2026 release, with a 1.4X book-to-bill ratio and a $1.2 billion backlog supporting FY2027 growth guidance.
• Share dilution from the all-stock BlueHalo acquisition is fading as institutions, which own approximately 85% of AVAV, continued buying during the correction.

AeroVironment’s NASDAQ: AVAV share price has faced its share of headwinds, enough to drive the stock to long-term lows despite general strength among drone makers. The critical detail, however, is that headwinds are abating and fiscal year 2027 (FY2027) guidance suggests a solid year ahead.

While guidance came in slightly below the consensus estimate, analysts expected far worse, as whisper figures were in the low end of the range. Looking ahead, given the company’s now-diversified defense business, the odds are high that it will continue to gain traction, drive value for shareholders, and lead to a full recovery in its stock price.

The technical setup is clear. The market for AVAV sold off hard in early 2026, shedding approximately 65% from its peak, but reached long-term support targets aligned with a critical pivot point ahead of the release, a bottom for this market. The critical pivot point is the high set in 2021, broken in 2024, and tested in 2025. The 2025 test triggered a robust market response, as did the fiscal Q4 earnings release. In the wake of its June 29 earnings news, the stock shot up 20% premarket, before settling slightly at the open.

With this move, AVAV has not only indicated its bottom, but also a high probability of continuing the rebound in the near, mid, and long terms.

AeroVironment Outperforms in 2026, Guides for Growth in 2027

AeroVironment had a solid fiscal Q4 despite the analysts' misgivings. Whether or not the Satellite Communications Augmentation Resource (SCAR) contract is lost, the company’s products remain in demand, with organic and acquisitional growth combining to drive revenue up 133.3% year-over-year (YOY). Revenue outpaced MarketBeat’s consensus by nearly 1,500 basis points (bps), with strength in all reporting segments. Product sales grew by 106%, led by a 334% increase in services.

The only bad news was that acquisitions altered the product mix and lowered the company’s gross margins. The upshot is that revenue growth offset the impact, leaving cash flow and earnings ahead of forecasts. The $1.84 in adjusted earnings per share (EPS) was up modestly compared to the triple-digit topline advance due to a higher share count, but approximately 2,500 bps above forecasts, underscoring balance sheet strength and a healthy outlook.

Guidance was a market catalyst. The company’s guidance fell slightly short of the consensus but, with estimates falling, was much better than it could have been. The takeaway is that AVAV forecasts modest double-digit revenue growth and margin strength backed up by its book-to-bill ratio and backlog. Book-to-bill, a measure of new orders relative to filled orders, is running at 1.4X, driving the backlog up by more than 70% YOY to $1.2 billion, more than 50% of the FY2027 revenue forecast.

Analysts Highlight Deep Value Opportunity: Institutions Bought the Correction

Some analysts expressed caution following the release due to near-term headwinds, but the group remained generally optimistic, with commentary focused on Q4 strength and the likeliehood of the AeroVironment outperforming its guidance.

AVAV’s revenue tends to be back-ended, as is normal for defense contractors, with 55% or more expected in the second fiscal half. No analyst revisions were issued immediately after the release, leaving the consensus intact.

Prior to the earnings release, the consensus analyst price target assumed more than 100% upside from the critical support. Going forward, a critical detail is the lowest analyst target of $205. Despite being on the low end of targets, it presents a 45% upside from the critical support and would be sufficient to put this market above its long-term exponential moving average and in a technical reversal.

Institutional trends reveal this group bought AVAV throughout its correction. They own approximately 85% of the stock, bought at a pace of nearly $2 per $1 over the trailing 12 months (TTM), and will likely continue to provide support in future quarters. Catalysts for ownership include manufacturing business scaling, margin improvements, and BlueHalo integration.

Dilution Threat Gone: Clear Skies Ahead

Among the issues pressuring AVAV’s stock in early 2026 was the issuance of shares related to its BlueHalo acquisition. With an all-stock deal, AVAV’s share count increased by an average of 78% YOY as of fiscal Q4, creating significant overhang in the market. The story in 2027, however, is that the company is well-capitalized with no need to raise funds.

The outcome is that market overhang is evaporating as business traction is regained, leaving the market free to advance in the upcoming quarters. The balance sheet reflects the impacts of aggressive acquisition, with liabilities and debt up, but the company is financially healthy, with low leverage and improving equity.

This year’s biggest risk is negative free cash flow. The company will improve core margin, but spending on expansion, acquisition integration, and scaling will cut into cash flow. The upshot is that cash flow and balance sheet metrics suggest the company can easily sustain operations and financial health; the risk is that stock price upside will be limited until there is better visibility on cash flow and free cash flow.