Defense stocks have been gaining in recent weeks, and the reason could be twofold. First, the Israel-Hamas conflict brought buyers into defense stocks, while a sector rotation could also be underway after the big artificial intelligence-led rally of 2023. AeroVironment, a defense and AI stock, has taken advantage of both.
Not only has AeroVironment rallied for seven days straight, it has outperformed the S&P 500 by far in 2024. AeroVironment has risen 42% year to date vs. the S&P 500's 9% gain.
Further, its relative strength line, which measures the stock's performance vs. the index, is at a new high.
AeroVironment shares are not far from their all-time high of 184.61, the stock's current buy point out of a cup base. As a result, the company is today's selection for IBD 50 Stocks To Watch.
AI Stock Gets A Defense Contract
AeroVironment got a boost Tuesday, when the U.S. Defense Department picked the company's Switchblade 600 "loitering" munition system. These systems are aerial weapons that can fly around looking for a target until it is located, then strike with an anti-armor warhead.
Shares were up fractionally in recent action.
In the news release announcing the deal, AeroVironment Senior Vice President Brett Hush said Switchblade can help "field thousands of autonomous systems across multiple warfighting domains." Hush supervises the company's loitering munition system projects.
The AI stock ranks first in the aerospace and defense group. AeroVironment provides AI-enabled autonomous systems and computer vision tools that the Pentagon uses.
AeroVironment Sales, Earnings Growth
During the company's fiscal third quarter, sales grew 39% to $186.6 million while earnings soared 91% to 63 cents a share. The stock gapped up and broke out in strong volume after it reported results on March 5, according to IBD MarketSurge.
AeroVironment's Composite Rating and Relative Strength Rating are nearly ideal at 98 and 96 while the EPS Rating is an adequate 85.
The AI stock also has an Accumulation/Distribution Rating of A- which indicates strong interest from institutional investors like mutual funds and ETFs in recent weeks.
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