AeroVironment Inc (NASDAQ:AVAV) shares are jumping higher Tuesday after JPMorgan kicked off coverage with an Overweight rating and a $320 price target.
What's Driving The Surge
JPMorgan analyst Seth Seifman said AeroVironment is positioned to deliver mid‑teens growth thanks to its exposure to some of the fastest‑growing areas in defense, including drones, counter‑drone systems and space, CNBC reported. He noted that the company's experience in these segments puts it in a strong spot as demand accelerates both in the U.S. and abroad.
Seifman also pointed out that AeroVironment stands to benefit as the Department of War looks to expand the industrial base and adopt a more commercial approach to procurement.
Premium Valuation Justified
Seifman argued that AeroVironment's tailwinds support a higher valuation. He noted that the stock has historically traded at an average of 4.7x forward sales since 2020, but said a premium is warranted given rising U.S. and international defense budgets, heightened geopolitical risk and the defense department’s push to expand the industrial base.
AeroVironment shares are up 55% over the past year, though they've been mostly flat so far this year.
What Does The Technical Picture Show?
AeroVironment is currently positioned in a challenging technical setup, having recently broken below key support levels. This indicates potential bearish momentum, which traders should watch closely as it could signal a shift in trend direction.
The RSI is currently neutral, suggesting that there isn’t strong momentum pushing the stock in either direction. However, it previously entered overbought territory on Jan. 8, indicating that the stock may have experienced excessive buying pressure at that time.
MACD is currently below its signal line, indicating bearish pressure in the short term, suggesting that traders should be cautious, as it reflects a weakening momentum that could lead to further downside.
Key support is at $240.00, while resistance is at $293.00. If AeroVironment’s stock tests the support level and holds, it may indicate a potential reversal, but a break below could lead to further declines.
Over the past 12 months, AeroVironment’s stock has gained 70.37%, reflecting a strong upward trend despite recent volatility.
AVAV Price Action: AeroVironment shares were up 7.36% at $261.81 at the time of publication on Tuesday, according to Benzinga Pro.
Image: Piotr Swat/Shutterstock
