Aerovironment's 57% Run: Is the Post-BlueHalo Setup a Buy or a Sell?

The stock's 57% surge wasn't a single event. It was the result of a powerful confluence of high-impact catalysts that fundamentally reshaped the company's profile and secured its future pipeline. Three specific events drove the rally.

First, the BlueHalo acquisition, finalized in May 2025, was the foundational catalyst. It nearly doubled the company's revenue overnight, adding critical space, cyber, and directed energy capabilities to Aerovironment's core drone and robotics portfolio. This wasn't just a revenue bump; it was a strategic pivot that expanded the company's addressable market and competitive scope.

Second, the $874 million U.S. Army IDIQ contract awarded in December 2025 provided a massive, multi-year revenue anchor. This five-year deal secures future foreign military sales for Aerovironment's Group 1-3 UAS and counter-UAS systems, locking in demand and de-risking a significant portion of its backlog. It validated the company's technology and its ability to win large, strategic contracts.

Finally, the $4.8 million Coast Guard ROV contract in December 2025, while smaller in dollar terms, was a tactical win that highlighted broader geopolitical and operational trends. It came alongside the Force Design 2028 initiative, signaling a sustained push for unmanned systems across all domains. This contract, combined with the Army deal, created a powerful narrative of multi-service, multi-domain demand.

Together, these events created a perfect storm. The acquisition provided scale and new capabilities, the Army contract secured a massive future revenue stream, and the Coast Guard deal demonstrated the expanding, urgent need for unmanned systems. This confluence of catalysts is what drove the stock's explosive run.

Post-Run Financial Reality: Strengths and Valuation Compression

The financial reality post-surge is one of explosive growth and robust visibility, but also of a compressed valuation that may now offer a tactical setup. The numbers from the latest quarter confirm the story is still accelerating.

Revenue hit a record $472.5 million for the second quarter of fiscal 2026, a 151% year-over-year jump. The acquisition of BlueHalo was the engine, contributing $245.1 million of that total. More importantly, the legacy business is scaling strongly, with its revenue up 21% year-over-year to $227.4 million. This dual-track growth-acquisition-driven scale and organic expansion-validates the strategic pivot.

The company's order book is even more telling. It posted bookings of $1.4 billion for the quarter, resulting in a book-to-bill ratio of 2.9 and a backlog that now sits at $1.1 billion. This near-term visibility is exceptional, providing a clear revenue pipeline that de-risks the forward view.

Yet the stock's recent pullback has compressed its valuation dramatically. The share price pulled back 16.7% last week, and the trailing price-to-sales ratio has fallen from 13.5 at year-end 2025 to 4.58. That compression is the tactical opportunity. The fundamental story-record revenue, a massive backlog, and a scaled platform-remains intact. The market's sharp retreat suggests the initial euphoria has passed, potentially pricing in a more cautious near-term view.

The setup now hinges on execution. The financials show strength, but the valuation has reset. For an event-driven strategist, this compression after a major catalyst run often creates a mispricing window. The risk is that the stock's momentum has been exhausted, but the underlying order flow and backlog provide a solid floor. The pullback may have created a point where the stock's price no longer fully reflects its robust near-term visibility.

Catalysts and Risks for 2026: The Tactical Setup

The tactical setup for 2026 now hinges on three immediate factors: an upcoming earnings call, a valuation ceiling, and a critical execution watchpoint. The stock's recent pullback has reset the board, but the catalysts and risks are clearer than ever.

First, the upcoming Q2 FY2026 earnings call is the next major catalyst. This will be the first financial report to fully reflect the BlueHalo acquisition's integration and the company's scaled operations. Management's guidance on backlog conversion, margin trajectory, and the pace of Army contract fulfillment will be scrutinized. Any deviation from the strong order book narrative could trigger another sharp move.

The primary risk is the stock's valuation, which remains high relative to near-term cash flow. Despite a 16.7% pullback last week, the shares are still up over 50% year-to-date. This leaves little room for operational missteps. As one analysis notes, the company scores poorly on valuation checks, suggesting the market is pricing in a flawless execution of its growth story. Any delay in converting the $874 million Army contract backlog or integration hiccups at BlueHalo could quickly test that premium.

Execution is the watchpoint. The company must seamlessly integrate BlueHalo's space and cyber capabilities while fulfilling its massive Army contract over the next 12 to 24 months. The record bookings of $1.4 billion and backlog of $1.1 billion provide a strong foundation, but the risk is that the sheer scale of these new obligations strains resources or margins. The tactical opportunity is that the valuation compression after the initial run may have priced in some of this risk, creating a potential mispricing if execution stays on track.

The bottom line is a high-stakes test. The earnings call will provide the first hard data on post-acquisition performance, the valuation leaves no margin for error, and the execution of the Army contract is the ultimate proof of concept. For now, the setup favors a wait-and-see stance, with the stock likely to remain volatile as it navigates this critical phase.