AVAV Plunges 12.26%: What's Behind the Sudden Sell-Off?

Summary
• Aerovironment (AVAV) tumbles 12.26% intraday to $246.92, its lowest since October 2025
• Q3 earnings report shows 151% revenue surge to $472.5M but misses EPS and guidance
• $874M U.S. Army contract awarded for UAS/C-UAS systems announced December 8
• Sector leader Lockheed Martin (LMT) gains 0.95% as AVAV struggles with profit concerns

Aerovironment’s sharp intraday drop defies its recent 83% annual rally, driven by a mix of earnings underperformance and bearish guidance. Despite a $874M contract win and 151% revenue growth, the stock trades near its 52-week low of $102.25. With 15 Wall Street analysts maintaining a Strong Buy rating and a $389.57 average price target, the sell-off raises questions about short-term profit pressures and long-term execution risks.

Earnings Disappointment Overshadows Contract Wins
Aerovironment’s 12.26% intraday plunge stems from a Q3 earnings report that highlighted a 151% revenue surge to $472.5M but fell short of EPS expectations and issued weaker-than-anticipated full-year guidance. While the $874M U.S. Army contract for UAS/C-UAS systems and $13.2M P550 UAS deal for the Army’s LRR program were announced, the market fixated on the company’s $246.92 price (down from $281.42) and its -45.75x dynamic P/E ratio. Analysts noted that acquisition costs and profit margins, rather than top-line growth, drove the sell-off. The stock’s 52-week high of $417.86 now feels distant as the 200-day moving average at $233.95 looms as critical support.

Aerospace & Defense Sector Mixed as LMT Gains, AVAV Tumbles
While Aerovironment’s shares crater, the broader Aerospace & Defense sector remains mixed. Sector leader Lockheed Martin (LMT) rose 0.95% on the day, buoyed by its F-35 program and defense budget optimism. However, AVAV’s 12.26% drop contrasts with peers like Boeing (BA) and Raytheon (RTX), which traded in neutral territory. The sector’s recent $410.8M in government contracts for AVAV’s loitering munitions and C-UAS systems highlight demand for its products, but profit execution remains a key differentiator. AVAV’s -45.75x P/E versus LMT’s positive valuation underscores the market’s skepticism about its near-term profitability.

Options Playbook: Capitalizing on AVAV’s Volatility
• 200-day MA: $233.95 (below current price)
• RSI: 50.29 (neutral)
• Bollinger Bands: Upper $316.79, Middle $283.40, Lower $250.01 (price near lower band)
• MACD: -14.56 (bearish), Signal Line: -17.27 (bullish divergence)

AVAV’s technicals suggest a short-term bearish bias with long-term range-bound potential. Key levels to watch: 200-day MA at $233.95 and Bollinger lower band at $250.01. The stock’s 8.24% turnover rate and 52-week range of $102.25–$417.86 indicate high volatility. For options, focus on contracts with high leverage and moderate delta to hedge against a potential rebound.

Top Put Option: AVAV20251219P245
• Contract Code: AVAV20251219P245
• Type: Put
• Strike Price: $245
• Expiration: 2025-12-19
• IV: 63.18% (high volatility)
• Leverage Ratio: 29.61% (moderate)
• Delta: -0.417 (sensitive to price drops)
• Theta: -0.0385 (moderate time decay)
• Gamma: 0.015 (responsive to price swings)
• Turnover: 107,400 (liquid)
This put option offers a 53.70% price change ratio and 29.61% leverage, ideal for capitalizing on a 5% downside scenario (projected price: $234.57). Payoff would be max(0, $245 - $234.57) = $10.43 per share.

Top Put Option: AVAV20251219P240
• Contract Code: AVAV20251219P240
• Type: Put
• Strike Price: $240
• Expiration: 2025-12-19
• IV: 56.17% (moderate)
• Leverage Ratio: 47.38% (high)
• Delta: -0.329 (moderate sensitivity)
• Theta: -0.0545 (moderate decay)
• Gamma: 0.0156 (responsive)
• Turnover: 67,287 (liquid)
This put offers a 34.27% price change ratio and 47.38% leverage. In a 5% downside scenario, payoff would be max(0, $240 - $234.57) = $5.43 per share. Its high leverage and moderate delta make it a balanced bet for a bearish move.

Action Alert: If AVAV breaks below $250.01, consider AVAV20251219P245 for short-side exposure. Aggressive bulls may target a bounce above $283.40 with AVAV20251219C250 if the 200-day MA holds.

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.

Act Fast: AVAV at Pivotal Crossroads
Aerovironment’s 12.26% intraday drop signals a critical juncture for investors. While the stock’s 52-week low of $102.25 remains distant, the 200-day MA at $233.95 and Bollinger lower band at $250.01 are immediate lifelines. The $874M U.S. Army contract and 15 Wall Street Buy ratings suggest long-term resilience, but near-term profit execution and guidance clarity will dictate direction. Sector leader Lockheed Martin’s 0.95% gain highlights AVAV’s divergence. Watch for a breakdown below $250.01 or a rebound above $283.40 to confirm the next move.