Aerovironment Plummets 12.35%: Earnings Shock and Sector Volatility Collide

Summary
• Aerovironment (AVAV) tumbles 12.35% intraday to $246.65, its lowest since October 2025
• Q3 earnings miss by 44% and slashed guidance trigger investor panic
• $874M foreign military sales contract announced but overshadowed by profit concerns
• Sector peers like Lockheed Martin (LMT) rise 1.15% as defense tech optimism persists

Aerovironment’s 12.35% intraday plunge has sent shockwaves through the defense sector, driven by a catastrophic earnings miss and revised guidance. Despite record $472.5M revenue (up 151% YoY), the stock collapsed as investors reacted to a -6.4% operating margin and $3.47/share adjusted EPS forecast. The move defies broader sector strength, with LMT’s gains highlighting divergent market sentiment.

Earnings Miss and Guidance Cut Trigger Flight to Safety
Aerovironment’s stock imploded after reporting Q3 adjusted EPS of $0.44, far below the $0.79 consensus, while slashing full-year guidance to $3.47/share (down 4.8%). The operating margin turned negative (-6.4%) from 3.7% in the prior year, exposing structural cost pressures from its BlueHalo acquisition. Management’s admission of 'sustainability concerns' amid $48.2M in amortization charges and a 2.9 book-to-bill ratio failed to reassure investors. The $874M U.S. Army contract, announced post-earnings, arrived too late to reverse the selloff as traders focused on near-term profitability risks.

Defense Sector Splits as AVAV Crumbles Amid Earnings Woes
While the aerospace & defense sector remains resilient—bolstered by $1M+ drone procurement plans and LMT’s 1.15% rise—Aerovironment’s collapse highlights divergent fundamentals. Sector peers benefit from long-term defense spending tailwinds, but AVAV’s reliance on acquisition-driven growth and thin margins has exposed it to profit scrutiny. The $246.65 intraday low now sits 12.35% below its 52-week high of $417.86, creating a 39.4% discount that may attract contrarians if the stock stabilizes above its 200-day MA of $233.95.

Bearish Options Play and Technical Reversal Setup
• 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)

With AVAV trading near its 52-week low and RSI hovering near neutral territory, the stock presents a high-risk, high-reward setup. Key levels to watch: $250 (lower Bollinger band), $245 (intraday low), and $233.95 (200-day MA). The 52.3% implied volatility on the 12/19 $250 put (AVAV20251219P250) suggests market anticipation of further downside. For aggressive bearish bets, consider the 12/19 $260 put (AVAV20251219P260) with 58.29% leverage and 86.45% price change potential. A 5% downside scenario to $234.32 would yield a put payoff of $25.68 per contract for the $250 strike. The 12/26 $240 put (AVAV20251226P240) offers 68.51% implied volatility and 30.91% leverage for a longer-term bearish play.

Backtest Aerovironment Stock Performance
The performance of AVAV after a -12% intraday plunge from 2022 to now has shown positive returns, with the 3-Day win rate at 57.36%, the 10-Day win rate at 58.42%, and the 30-Day win rate at 62.26%. The maximum return during the backtest was 14.12%, with a maximum return day at 59.

AVAV at Crossroads: Rebound or Reckoning?
Aerovironment’s 12.35% drop has created a critical inflection point. While the stock’s 58.6% YTD gain and $417.86 52-week high suggest long-term demand, the current technical setup—MACD divergence, RSI neutrality, and Bollinger band compression—favors a continuation of the selloff. Sector leader Lockheed Martin’s 1.15% rise underscores the market’s preference for established margins over high-growth volatility. Investors should monitor the $250 support level and the 12/19 options expiration for directional clues. A breakdown below $245 could trigger a test of the 200-day MA at $233.95, offering a high-risk entry for those betting on a mean reversion trade.