AeroVironment (NASDAQ: AVAV) faces headwinds in 2026, including the end of its SCAR contract and the resulting impact on market sentiment. However, even with analysts reducing targets and guidance below expectations, this defense company offers value to investors willing to buy at long-term lows and wait for traction to be regained. It is well-positioned with a battle-proven portfolio, a still-solid, if diminished, backlog, and a healthy balance sheet that enables reinvestment and improved shareholder value. The only question is the timing of a rebound, which could occur more quickly than the guidance update suggests.
Analysts are trimming targets following the fiscal Q3 2026 earnings update, but that is the worst that can be said of the data.
The reductions were expected, given the likelihood of losing the SCAR business, but this market has overreacted.
The six revisions initially tracked by MarketBeat set a new low target, which still suggests upside. More importantly, the average of new targets forecasts a 30% upside, with additional gains at the high end.
Other trends, including increasing analyst coverage, a steady Moderate Buy rating, and 86% Buy-side bias, reflect a more bullish tone and potential catalyst. Assuming AeroVironment can regain traction and expand into commercial markets, analysts may increase price targets later in the year, triggering bullish market activity.
AeroVironment Price Action Shows Hard Bottom at $200
There is always a risk of lower prices, but for AVAV, the risk is limited. The chart price action shows a technical bottom at $200, compounded by price-volume and indicator divergences. The increased price volume suggests accumulation, given the sideways action since the March 2 price implosion inspired by the SCAR news, while the divergences show bears losing control.
The risk is that selling will re-intensify, but the early indication is the opposite. The recent earnings release triggered an early, pre-opening selloff, which in turn triggered buying at the opening bell. The resultant signal, including the divergence in stochastic and moving-average convergence-divergence (MACD), suggests the market is coiled like a spring and ready to bounce higher. The question then becomes how high the price may go and what may drive it higher?
The critical resistance targets are near $225, $240, and $250, with $250 also functioning as an important pivot point. The $250 level aligns with a long-term uptrend that broke in early March and is likely a market trigger. If price action fails to cross this level, an uptrend can continue, but it will be muted. In that scenario, the market could top out around $280 and then trend sideways until a potent catalyst emerges. The risk is that price action would correct and fall back to recent lows before gaining sustainable traction. The bull-case scenario includes a move above the uptrend line, but even then, the $280 level remains a potential market cap.
Institutions Support AeroVironment Stock Market
Institutional activity will be the deciding factor, and it was bullish ahead of the release. MarketBeat data show this group not only owns more than 85% of the stock but also has bought on balance for 10 consecutive quarters, with bullish activity persisting in early Q1 2026. The likely outcome is that they continue to buy this stock while it trades at long-term lows, which will be reflected in the March data.
AeroVironment’s fiscal Q3 results were a disappointment, delivering top- and bottom-line misses, but the bar was high, and events out of its control entered the equation. Aside from that, the results were strong, robust even, with revenue growth topping 140% year over year (YOY) and profits.
Guidance was the same, with revenue and earnings targets below the high bar the analysts had anticipated, but underlying metrics were solid. The company forecasts only slightly slower growth than the 135% expected by analysts, with the profit range bracketing the consensus and looking potentially cautious.
Catalysts for AVAV include continued BlueHalo integration, demand for drone products, execution on its backlog, and its ability to scale. The company emphasizes its ability to scale production, a strength that helps it secure new contracts. The company is also working to diversify its business, focusing on commercial use of its platforms. Targeted industries include inspection, precision agriculture, surveillance, and tracking.