Update: AeroVironment - Google Moving Fast On Drones, Other Tech Giants To Catch Up Through M&A?

Sep. 2.14 | About: AeroVironment, Inc. (AVAV)

Summary

Google is moving fast on drones following its recent acquisition of Titan.

This confirms our view that AeroVironment could attract M&A attention, specifically from tech giants seeking to catch up with Google.

The valuation of AeroVironment could easily heat up in view of Facebook’s/Amazon’s financial power.

It looks like Google (NASDAQ:GOOG) (NASDAQ:GOOGL) is moving fast on drones following its recent acquisition of Titan Aerospace, with The Atlantic reporting that Google has carried out over 30 test flights for its drone initiative, known as Project Wing. Google's objective is to use drones for a same-day delivery service, which is likely to compete in the future with Prime Air, a drone delivery service Amazon (NASDAQ:AMZN) has been testing for months.

In our March and July articles on AeroVironment (NASDAQ:AVAV), we explained that the M&A appeal of drone makers was rising given the booming demand for commercial drones and that natural buyers would be Boeing (NYSE:BA) and large defense contractors Northrop Grumman (NYSE:NOC) and Textron (NYSE:TXT) that are active in this segment but have not been successful in small drones until now. We added that tech giants such as Facebook (NASDAQ:FB) and Amazon could also be part of the M&A game as they are seeking to offer new services to their customers. Reportedly, Facebook tried to acquire Titan to develop a fleet of drones to provide Internet access to consumers in undeveloped parts of the world.

In all, we continue to believe that AeroVironment could attract M&A attention, specifically from tech giants seeking to catch up with Google. The valuation of AeroVironment and other drone assets such as Elbit Systems (NASDAQ:ESLT) could easily heat up in view of Facebook's/Amazon's financial power.

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