Aerovironment (AVAV) Plunges 10.2% on Earnings Miss and Integration Woes—What’s Next for the Drone Giant?

Summary
• Aerovironment (AVAV) tumbles 10.2% to $252.67, its lowest since October 2025
• Q2 earnings miss ($0.44 vs. $0.79) and BlueHalo acquisition costs trigger selloff
• $874M Army contract and $1.98B revenue guidance fail to offset near-term concerns

Aerovironment’s stock has plunged over 10% in a single session, marking one of the most volatile days in its 52-week range. The selloff follows a Q2 earnings report that highlighted integration challenges from the BlueHalo acquisition, operational disruptions, and a revised full-year guidance. Despite securing a $874M Army contract and maintaining a robust order backlog, the market’s focus remains on near-term profitability hurdles. With the stock trading near its intraday low of $250, traders are now dissecting technical levels and options activity to gauge the next move.

Earnings Miss and Integration Costs Trigger Sharp Selloff
Aerovironment’s Q2 earnings report revealed a $0.44 adjusted EPS, far below the $0.79 consensus, primarily due to $20M in BlueHalo acquisition-related costs and $15M in ERP implementation expenses. The company also cited delays in foreign military sales shipments caused by a government shutdown. While revenue surged 151% to $472.5M, the profit shortfall and revised full-year guidance ($3.40–$3.55 EPS vs. prior $3.60–$3.70) signaled to investors that integration challenges are weighing on margins. Analysts at Piper Sandler and BTIG, despite maintaining 'Overweight' and 'Buy' ratings, highlighted near-term margin compression as a key risk, even as long-term growth from defense contracts remains intact.

Aerospace & Defense Sector Mixed as AVAV Underperforms
The broader Aerospace & Defense sector saw mixed performance, with Lockheed Martin (LMT) down 0.37% and Boeing (BA) flat. AVAV’s selloff diverged from sector trends, driven by its specific earnings miss and integration costs. While peers like Raytheon (RTX) and Northrop Grumman (NOC) reported stable margins, AVAV’s near-term challenges—stemming from BlueHalo integration and ERP disruptions—highlighted execution risks in high-growth defense tech plays. The sector’s resilience, however, suggests AVAV’s long-term contract pipeline could still attract buyers at a discount.

Bearish Options and ETFs Emerge as Key Plays Amid Volatility
• 200-day MA: 233.95 (below current price) | RSI: 50.29 (neutral) | MACD: -14.56 (bearish divergence)
• Bollinger Bands: Lower bound at $250.01 (critical support) | Upper at $316.79 (resistance)
• Turnover Rate: 4.75% (high liquidity) | Dynamic PE: -46.81 (negative sentiment)

Technical indicators suggest a bearish bias, with the stock testing its 200-day MA and Bollinger lower band. The RSI at 50.29 indicates a neutral zone, but the MACD’s negative divergence and declining volume (1.78M shares) hint at exhaustion in the short-term rally. For options traders, the AVAV20251219P250 and AVAV20251219P255 put contracts stand out due to their high leverage ratios (29.18% and 20.15%) and implied volatility (64.13% and 72.62%).

• AVAV20251219P250 (Put, $250 strike, 12/19 expiry):
- IV: 64.13% (high volatility)
- Delta: -0.417 (moderate sensitivity)
- Theta: -0.0469 (slow time decay)
- Gamma: 0.0145 (responsive to price swings)
- Turnover: $35,103 (liquid)
- Payoff at 5% downside (ST = $240): $10.00 (max(0, 250 - 240))
- Why it stands out: High leverage ratio and IV make it ideal for a bearish move below $250.

• AVAV20251219P255 (Put, $255 strike, 12/19 expiry):
- IV: 72.62% (extreme volatility)
- Delta: -0.487 (strong sensitivity)
- Theta: -0.0392 (moderate time decay)
- Gamma: 0.0131 (moderate responsiveness)
- Turnover: $36,408 (liquid)
- Payoff at 5% downside (ST = $240): $15.00 (max(0, 255 - 240))
- Why it stands out: Highest IV in the chain, offering outsized gains if the stock breaks below $250.

Trading Setup: Key levels to watch include $250 (Bollinger lower band) and $245 (psychological support). A break below $250 could trigger a test of the 200-day MA at $233.95. Aggressive bearish players should prioritize AVAV20251219P255 for its high IV and leverage, while conservative traders may target AVAV20251219P250 for a safer entry. If $250 holds, a rebound into the $260–$265 range could see short-term buyers re-enter.

Backtest Aerovironment Stock Performance
The performance of AVAV after a -10% intraday plunge from 2022 to now has shown positive returns. The backtest data indicates a 3-day win rate of 56.87%, a 10-day win rate of 58.14%, and a 30-day win rate of 61.73%. Additionally, the maximum return during the backtest period was 13.96%, with a maximum return day at 59.

AVAV at Pivotal Crossroads—Act Now Before Volatility Intensifies
Aerovironment’s sharp selloff underscores the market’s skepticism over near-term profitability despite a robust contract pipeline. The stock’s proximity to its 200-day MA and Bollinger lower band suggests a critical juncture: a break below $250 could accelerate the decline toward $233.95, while a rebound above $260 might reignite long-term optimism. With the sector leader Lockheed Martin (LMT) down 0.37%, investors should monitor AVAV’s ability to stabilize its margins and scale production for the Switchblade drones. Act now: For bearish bets, AVAV20251219P255 offers high leverage and IV; for bullish plays, watch for a rebound above $260 into the $265–$270 range.