Shorts Were Right on AeroVironment

Wow, a complete mess from AeroVironment (AVAV) after the close Tuesday- I've been so focused on the indexes that I have not been looking that closely at individual stocks, but the shorts were correct on this one.

The stock is down 32% as I write this to $20.80 but apparently was as down as low as $18.50 earlier in the morning - cripes. I am exiting the the 0.5% position (it was 0.7% going into the day) with a staggering 40% loss on this last piece of the position; thankfully the position size was small but it was a $3500 hit (on $940K portfolio)

Tuesday was a day of shame - here is some earnings color

• AeroVironment Inc (AVAV), a maker of unmanned aircraft systems, posted a 24 percent drop in quarterly profit. Results trailed market estimates on higher expenses, and it lowered its full year revenue growth forecast. For the third quarter ended Jan. 31, the company earned $4.5 million, down from about $6.0 million a year earlier.
• The Monrovia, California-based company now expects 2009 revenue growth of between 11 percent and 16 percent, down from its previous forecast of 20 percent to 25 percent.
• "Even with our backlog, our view of the balance of the year requires that we lower our revenue outlook for fiscal 2009. This is driven largely by current economic conditions as well as the timing of the receipt and shipment of customer orders," Chief Executive Tim Conver said in a statement.
• As of Jan. 31, funded backlog was $139.0 million. Gross margin fell 16 percent for the quarter. Cost of sales rose 24 percent, while research and development expenses jumped 26 percent.

I will say I am confused by the guidance since this company is so reliant on the US government - the whole thesis here is the government would not be cutting back. But apparently its non-government business must be suffering. Either way, my thesis is incorrect so I am exiting. Not sure who exactly has a safe revenue stream anymore - all the ports in the storm are being decimated one by one.

No position

Comments

[ebikeguy:]

AeroVironment has a huge backlog and continues to make A LOT of profit. They keeping winning new multi-million dollar military contracts because they have proved that they can design and build unmanned aircraft that no one else can. Their expenses went up because they are investing large amounts of capital in developing the non-governmental side of the business - electric vehicle charging stations, wind power, and other power generation, management and distribution systems.

Yesterday's crash represents the opposite of "irrational exuberance." Would one call that "irrational discouragement?" The company remains very strong. As of today, it is exceptionally undervalued. If I had a million dollars, I'd invest it all in AVAV right away.

Mar 11 01:00 PM

[Pie-eyed piper:]

Perhaps thats why you don't have a million dollars?

Mar 11 04:03 PM

[User 232822:]

Would unmanned aircraft work along the US-Mexican boarder?

Mar 11 08:13 PM

[ebikeguy:]

"Would unmanned aircraft work along the US-Mexican boarder?"

Absolutely. I hear this is in the works.

Mar 12 12:15 PM