Jim Cramer - Mad Money AeroVironment AVAV-Q BUY May 06, 2024

Shares are slumping from its recent peak because the Pentagon feels that AVA is charging too much money. And it trades at a high 50x PE. That said, he likes it.

Confusing. They just delivered record revenue, up 24% YOY and they won a 5-year contract with the US Army. The street expected higher guidance and not a reiteration, so shares are selling off.

We are fairly surprised AVAV has not done better, considering the ongoing wars and the increased defense spending movement. It remains net debt free and good earnings growth is expected, just not as much as previously. At 40X earnings, investors are questioning its premium valuation in light of slowing growth. It is also in the cross hairs of the new US government, which recently issued 'stop work' orders on some contracts to foreign entities'. We would like to see it as a HOLD, but the political risk is hard to quantify. If the Ukraine War ends there will also likely be a sentiment shift (negative) towards its growth prospects. We would thus be OK letting this go. 
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