AeroVironment Inc. (AVAV) walks the line between aerospace and tech, which might explain why the drone manufacturer is the rare defense contractor that is putting off profits to invest in new technologies. The market has allowed it so far, though investors might be starting to lose patience.
The Monrovia, Calif.-based company late last month reported a net loss of $2.9 million in a quarter where gross profit fell 25% and sales were down 19% year over year. Shares of the company lost nearly 10% of their value as a result, and have gained little of it back in the days since.
AeroVironment has a lot going for it. The company has a commanding market share selling small drones to the Pentagon, and its well-regarded products including its Raven vehicle should figure prominently in future Army purchases. Unmanned aerial vehicles have been a rare bright spot in an otherwise dismal military spending story, and analysts expect small drones like the ones AeroVironment makes to continue to hold up well in the event of further Pentagon cuts.
Small drones are preferred to larger UAVs like the Predator or Global Hawk because they are less expensive to operate. They are also more mobile and can be brought directly into a combat area, unlike larger crafts which often have to navigate great distances before engagement.
But the government has proven to be a fickle customer for even the best of suppliers, and troop drawdowns in the Middle East have created uncertainty about future demand for tools of combat.