Why AeroVironment Stock Is Absolutely Soaring This Week

AeroVironment's shares just blasted through the stratosphere—here's what's fueling the rocket ride.

Defense Contracts Ignite the Rally

Fresh Pentagon deals sent institutional money flooding in. Drones and unmanned systems demand spikes when global tensions rise—and AeroVironment's portfolio is packed with exactly what governments are buying.

Earnings Smash Expectations

Quarterly numbers didn't just beat—they obliterated forecasts. Revenue surged, margins expanded, and guidance got revised upward. Even the most bearish analysts scrambled to upgrade their ratings.

Short Squeeze Adds Rocket Fuel

Heavy short interest meant trapped bears had to cover—fast. That buying pressure turned a strong rally into a vertical launch. Classic Wall Street irony—the pessimists ended up financing the optimists' party.

Look, in a market where most traders can't tell a drone from a doorbell, sometimes you just ride the momentum. Just don't be the one left holding the bag when the music stops.

Green lights and upgrades

The State Department's policy shift should help AeroVironment sell drones internationally to a handful of new countries. This upside -- paired with a proposed budget from the Pentagon to nearly double drone and counter-drone spending -- has the market taking note of the company's stock.

Image source: Getty Images.

Following this news, AeroVironment stock received a reiterated buy rating from an analyst at William Blair and a new outperform rating from Bank of America.

The Bank of America noted Secretary of Defense Pete Hegseth's "Unleashing U.S. Military Drone Dominance" memo as a critical component of AeroVironment's growth potential.

However, as promising as these developments may prove to be for the company over the next few years, longer-term potential may come from its Blue Halo acquisition.

By bringing Blue Halo's counter-UAS, space technology, and electronic warfare and cyber segments into the fold, management believes it quadrupled its total addressable market.

Now AeroVironment is home to both the platforms (drones or ground robots, for example) and the software (communications, command and control, and artificial intelligence and autonomy) it needs to lead its niche in the defense industry.

It's trading at 78 times forward earnings, however. Interested investors may want to buy across multiple purchase points.