Aerovironment Plunges 12.2%: Earnings Miss and Guidance Cut Spark Sector-Wide Ripples

Summary
• AeroVironment (AVAV) slumps 12.2% to $247.08, its worst intraday drop since October 2025
• Q3 adjusted EPS of $0.44 misses estimates by 44%, while full-year guidance slashed to $3.47
• $874M foreign military sales contract awarded, but operational costs and ERP system delays weigh on margins

Today’s selloff in AVAV reflects a sharp divergence between its robust revenue growth and deteriorating profitability. The stock’s 12.2% decline—its largest intraday drop since October—underscores investor anxiety over near-term margin pressures and integration costs from the BlueHalo acquisition. Despite securing a $874M contract for UAS and C-UAS systems, the company’s operating margin turned negative, and its full-year guidance now implies a 4.8% earnings contraction. With the stock trading 39.4% below its 52-week high, the question looms: Is this a buying opportunity or a warning sign for a sector poised for long-term growth?

Earnings Miss and Guidance Cut Trigger Sharp Selloff
AeroVironment’s 12.2% intraday plunge stems from a dual blow: a Q3 adjusted EPS miss of 44% and a 4.8% downward revision to full-year guidance. While revenue surged 151% year-on-year to $472.5M, the company’s operating margin collapsed to -6.4%, dragged down by $100M in acquisition-related costs from BlueHalo and $50M in ERP system implementation delays. Management attributed the shortfall to higher tax rates and operational disruptions, but the market reacted harshly to the reduced earnings outlook. The stock’s sharp decline mirrors its 8.5% drop in late November, when broader market caution and a government shutdown delayed key economic data. This time, however, the sell-off is more sector-specific, as AVAV’s guidance cut overshadows its $874M contract win and $13.2M P550 UAS deal.

Aerospace Sector Mixed as AVAV Tumbles on Earnings
The aerospace and defense sector remains polarized, with AVAV’s selloff contrasting against broader industry resilience. While AVAV’s operating margin turned negative, peers like Lockheed Martin (LMT) edged up 0.23%, buoyed by its 2026 F-35 production ramp. The sector’s recent momentum—driven by the U.S. Army’s $1B drone procurement plan and SpaceX’s 550th Falcon 9 launch—has created a backdrop of optimism. However, AVAV’s integration challenges and margin compression highlight the risks of rapid expansion. The company’s $874M contract and new AV_Halo CORTEX platform could still position it for long-term gains, but near-term execution risks remain elevated compared to more diversified defense contractors.

Options Playbook: Capitalizing on Volatility and Key Levels
• 200-day MA: $233.95 (below current price) | RSI: 50.29 (neutral) | MACD: -14.56 (bearish divergence)
• Bollinger Bands: Upper $316.79, Middle $283.40, Lower $250.01 (current price near lower band)

AVAV’s technicals suggest a short-term bearish bias, with the 200-day MA acting as a critical support level. The RSI hovering near 50 indicates neutral momentum, but the MACD’s negative divergence and price proximity to the lower Bollinger Band signal oversold conditions. For traders, the key is to balance risk with the stock’s long-term contract pipeline. Two options stand out:

• AVAV20251219P240 (Put, $240 strike, 12/19 expiry):
- IV: 54.78% (moderate)
- Delta: -0.3498 (sensitive to price drops)
- Theta: -0.0304 (low time decay)
- Gamma: 0.0165 (moderate sensitivity to price swings)
- Turnover: 62,187 (high liquidity)
- LVR: 44.55% (moderate leverage)
- Payoff at 5% downside: $12.94 (max(0, 240 - 234.73))
This put offers a balanced risk-reward profile, with sufficient leverage to capitalize on a potential breakdown below $250 while avoiding extreme volatility.

• AVAV20251219C260 (Call, $260 strike, 12/19 expiry):
- IV: 56.50% (moderate)
- Delta: 0.3160 (moderate sensitivity)
- Theta: -0.7190 (high time decay)
- Gamma: 0.0154 (moderate sensitivity)
- Turnover: 72,972 (high liquidity)
- LVR: 54.94% (high leverage)
- Payoff at 5% downside: $0 (max(0, 234.73 - 260))
This call is a high-risk, high-reward play for aggressive bulls expecting a rebound above $260. The high leverage amplifies gains if the stock recovers, but the negative theta means time decay could erode value if the move is delayed.

Action Insight: If $250 breaks, AVAV20251219P240 offers short-side potential. Aggressive bulls may consider AVAV20251219C260 into a bounce above $260.

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: Watch $250 Support and Sector Catalysts
AeroVironment’s 12.2% selloff reflects near-term margin pressures but leaves the stock 39.4% below its 52-week high, creating a potential entry point for long-term investors. The key to its recovery lies in executing its $874M contract pipeline and scaling production at its new Salt Lake City facility. Technically, the 200-day MA at $233.95 and the lower Bollinger Band at $250.01 are critical levels to monitor. Meanwhile, sector leader Lockheed Martin (LMT) remains resilient, up 0.23%, signaling broader industry strength. Investors should watch for a rebound above $260 or a breakdown below $250 to dictate next steps. For now, AVAV’s volatility offers both risk and reward—position accordingly.