UBS has opened coverage on AeroVironment Inc. (NASDAQ:AVAV) and assigned a Neutral rating, establishing a $259 price objective - a level that is close to the company’s recent trading price of $262.99.
Analyst Gavin Parsons pointed to a rising global unmanned total addressable market and identified the BlueHalo acquisition as a strategic move that expands AeroVironment’s addressable markets. UBS set out a medium-term operating outlook that anticipates a 15% revenue compound annual growth rate (CAGR) and an 18.5% EBITDA margin by 2030. Those projections are put in the context of the company’s recent operating momentum, with AeroVironment recording 79.9% revenue growth over the last twelve months.
UBS highlighted several valuation variables that underpinned its Neutral rating. The firm’s margin estimate for 2028 sits 100 basis points below consensus. UBS noted that the average analyst price target of $387 implies a 44 times forward EBITDA multiple, or an EBITDA figure roughly 40% higher than UBS’s own estimate. According to UBS, the 32 times multiple implied by the current price would need to reflect about 33% upside to consensus EBITDA to bring the stock in line with AeroVironment’s historical average multiple of 25 times.
The report further argued that a 32 times multiple is more than double the valuation applied to prime defense contractors, suggesting investors could find lower-valuation alternatives to access defense-related growth. Supporting this point, InvestingPro data cited in the report shows AVAV trading at an enterprise value to EBITDA multiple of 126.4x, a figure UBS interprets as confirming substantial valuation premium and ascribing a significant gap between market price and the firm’s Fair Value assessment.
UBS also contrasted AeroVironment’s operating position against larger prime contractors, noting expected acceleration in growth for primes as they increase capital expenditures. The firm suggested that such contractors could offer investors exposure to defense spending expansion at lower relative valuations.
On balance-sheet metrics, UBS described AeroVironment as financially healthy, reporting a current ratio of 5.08 and characterizing the company’s debt load as moderate. The report pointed readers toward the InvestingPro Pro Research Report for AVAV and more than 1,400 other stocks for those seeking expanded analysis.
In other developments cited alongside UBS’s initiation, AeroVironment secured a $75 million, five-year contract with the U.S. Air Force through its UES division. That agreement focuses on developing advanced biotechnology and smart materials as part of the FRESH program, intended to enhance Air Force assets across multiple domains.
Analyst coverage from other firms was also noted. JPMorgan initiated coverage with an Overweight rating and a $320.00 price target, emphasizing AeroVironment’s foothold in growing defense markets such as drones and space technologies. Citizens reiterated a Market Outperform rating with a $400.00 price target, pointing to supportive U.S. and global defense priorities as catalysts for the company’s outlook. UBS’s Neutral stance therefore sits alongside more optimistic views from other sell-side firms.
The report rounded out its industry context by citing a projection that the global drone market is expected to surpass $53 billion by 2026, a backdrop UBS and other analysts view as supportive of demand for companies positioned in unmanned systems.
Key points
- UBS initiated coverage on AVAV with a Neutral rating and a $259 price target; current trading price cited at $262.99.
- UBS projects 15% revenue CAGR and 18.5% EBITDA margin by 2030, with AeroVironment having posted 79.9% revenue growth over the past twelve months.
- Valuation is the central concern - InvestingPro shows an EV/EBITDA of 126.4x, and UBS argues the current multiple is high relative to historical averages and prime defense contractors.
Risks and uncertainties
- Valuation risk - the stock’s current multiple may imply significant upside to consensus EBITDA to justify historical or peer multiples, which presents downside risk if earnings do not materially exceed current consensus.
- Competitive and sector risk - prime defense contractors may accelerate growth through higher capital expenditures, offering investors lower-valuation alternatives to capture defense spending expansion.
- Execution and market adoption - while AeroVironment has recent strong revenue growth and new contract wins, the ability to sustain margins and growth to UBS’s projected levels remains subject to operational execution.
The UBS initiation places a spotlight on the trade-offs facing investors: solid recent top-line acceleration and strategic acquisitions set against a market valuation that UBS regards as elevated. Other sell-side firms have taken more bullish stances with higher price targets, creating a range of analyst views on AeroVironment’s nearer-term upside and risk profile.