AVAV Plunges 12%: Earnings Shock or Strategic Rebound?

Summary
• Aerovironment (AVAV) drops 12.14% intraday to $247.255, its lowest since October 2025
• Q3 earnings miss and reduced guidance trigger selloff despite $874M foreign military sales contract
• Sector peers like Lockheed Martin (LMT) rise 0.84% as defense tech rotation gains momentum

Aerovironment’s sharp selloff reflects a market recalibration after a 151% revenue surge but a 6.4% operating margin plunge. With $410M in recent government contracts and a new C-Suite hire, the stock’s volatility underscores the tension between near-term profitability concerns and long-term defense tech growth. Traders now weigh whether this is a buying opportunity or a warning sign in a sector poised for AI-driven innovation.

Earnings Miss and Guidance Cut Trigger Sharp Selloff
Aerovironment’s 12.14% intraday drop stems from a Q3 earnings report that missed expectations on both profit and guidance. While revenue surged 151% to $472.5M, adjusted EPS of $0.44 fell short of $0.79, and full-year guidance was slashed to $3.47 (a 4.8% decline). The operating margin turned negative at -6.4%, signaling cost overruns or pricing pressures. Management attributed the shortfall to acquisition-related expenses and higher R&D costs, but investors reacted harshly, fearing a slowdown in margin expansion. The selloff accelerated after-hours as the market digested the revised outlook, despite recent $874M and $13.2M contract wins for UAS systems.

Defense Sector Volatility Amid Earnings Jitters
The aerospace & defense sector remains mixed as AVAV’s selloff contrasts with gains in sector leaders like Lockheed Martin (LMT), which rose 0.84% on optimism around its F-35 program. However, broader sector volatility persists due to government contract uncertainty and defense budget reallocations. Recent news of the U.S. Army’s $1B drone procurement and Anduril’s CCA prototype flight highlights long-term growth potential, but near-term earnings pressures—like AVAV’s—reflect execution risks in a capital-intensive industry. AVAV’s drop also aligns with a broader rotation out of high-flying tech stocks, as investors seek more stable defense plays.

Options Playbook: Capitalizing on AVAV’s Volatility
• 200-day MA: 233.95 (below current price) • RSI: 50.29 (neutral) • MACD: -14.56 (bearish) • Bollinger Bands: Lower bound at $250.01

AVAV’s technicals suggest a short-term bearish bias but a long-term range-bound profile. Key support lies at the 200-day MA ($233.95) and 200D support zone ($123.58–$129.54). A break below $245 could trigger further declines, while a rebound above $260 may test the 52W high of $417.86. The options chain reveals two high-conviction plays:

• AVAV20251219P240 (Put, $240 strike, 12/19 expiry):
- IV: 55.20% (moderate)
- Delta: -0.386 (sensitive to price drops)
- Theta: -0.0058 (minimal time decay)
- Gamma: 0.017 (responsive to volatility)
- Turnover: 130,081 (liquid)
- Leverage: 38.30% (high)
- Payoff at 5% downside (ST = $234.89): $5.89/share. This put offers asymmetric upside if AVAV breaks $240, with low time decay and high leverage amplifying gains.

• AVAV20251219C250 (Call, $250 strike, 12/19 expiry):
- IV: 55.83% (moderate)
- Delta: 0.438 (moderate sensitivity)
- Theta: -0.866 (high time decay)
- Gamma: 0.017 (volatility responsive)
- Turnover: 140,612 (liquid)
- Leverage: 35.02% (high)
- Payoff at 5% downside (ST = $234.89): $0.00. This call is a high-risk, high-reward bet on a rebound above $250, with high leverage but significant time decay. Aggressive bulls may consider this into a bounce above $260.

Hook: If $240 breaks, AVAV20251219P240 offers short-side potential. Aggressive bulls may consider AVAV20251219C250 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: Rebound or Rebalance?
Aerovironment’s 12% drop reflects a market recalibration of its growth story, but the stock’s 58.6% YTD gain and $410M in recent contracts suggest resilience. Traders should monitor the 200-day MA ($233.95) and $240 support level for directional clues. With sector leader Lockheed Martin (LMT) up 0.84%, defense tech remains in focus, but AVAV’s near-term path hinges on cost control and execution. Action: Watch for a breakdown below $240 or a rebound above $260 to dictate next steps. For now, the AVAV20251219P240 put offers a high-leverage play on the downside, while the C250 call remains a speculative long.