Ukraine drone supplier AeroVironment soars more than 20%, heads for best day in more than 2 years

WASHINGTON — Drone manufacturer AeroVironment’s shares rallied more than 25% on Wednesday on the back of better-than-expected fiscal first-quarter results.

Wednesday’s gain — the AeroVironment’s biggest since January 2021 — put the stock up 39% for 2023. That would make it the biggest one-year gain since 2020, when it popped 40.75%.

The Virginia-based weapons manufacturer earned $1 per share on revenue of $152 million. Analysts polled by LSEG expected a profit of 26 cents per share on revenue of $129 million.

The results led Baird analysts Peter Arment to upgrade the stock to outperform. He also hiked his price target to $128 from $95 per share, implying upside of more than 34% from Tuesday’s close. Adoption of AeroVironment’s Switchblade drone will be a key driver for the company, he said.

“We expect continued order flow for Switchblade especially new variants, as special operation forces build up initial inventory levels before the program enters a more steady state of volume once it is a program of record. The program of record date was established in FY20.”

In the weeks following Russia’s full-scale invasion of Ukraine, the Pentagon announced its decision to equip Kyiv with 100 of AeroVironment’s Switchblade drones.

The deployment of the single-use weapon, dubbed a “kamikaze drone,” to the fight in Ukraine may be one of the most significant uses of it in combat. It is not clear how often the U.S. military has utilized the Switchblade drone in theater.

AeroVironment makes the Switchblade 300 and the 600; both are equipped with cameras, navigation systems and guided explosives. The weapons can be programmed to automatically strike targets that are miles away or can loiter above a target until engaged by an operator to attack.

The 300 variant is designed to strike small targets, weighs a little more than 5 pounds and has a range of 10 miles. The 600 version of the weapon is designed to destroy tanks and other armored vehicles. It weighs slightly more than 120 pounds and has a range of more than 40 miles.

The system is considered cheaper than the combination of firing a Lockheed Martin Hellfire missile from General Atomics’ MQ-9 Reaper drone. The Switchblade 300 is estimated to cost $6,000, according to an NBC News report.

Since the inception of the Kremlin’s war last year, the U.S. has unleashed a war chest worth more than $43.2 billion for Ukraine.

Fred Imbert contributed reporting from CNBC’s…