AeroVironment, Inc. (AVAV) provides a range of robotic systems and associated services to government agencies as well as businesses. It recently posted a mixed set of numbers for the second quarter.
During the quarter, AVAV’s revenue rose 32% on the back of higher product sales and contract services revenue, but fell short of analysts’ estimates. Despite a lower gross margin, its bottom-line fared better than the Street’s expectations.
The company has been facing key challenges such as, supply chain delays, longer procurement cycles, slower government decision-making, and staffing shortages. Consequently, the company also scaled back its full year outlook.
With these developments in mind, let us take a look at the changes in AVAV’s key risk factors that investors should know.
Risk Factors
According to the TipRanks Risk Factors tool, AVAV’s top two risk categories are Legal & Regulatory and Finance & Corporate, contributing 25% and 23% to the total 56 risks identified, respectively.
Compared to a sector average of 40%, AVAV’s Finance & Corporate risk factor is at 23%. In its recent quarterly report, the company has added one key risk factor under the Finance & Corporate risk category.
Based on its present projections, if the company does not make a prepayment to reduce the outstanding balance of its loan or obtain an amendment to the credit agreement, then it may be in violation of the financial covenants under its credit agreement.
(See Insiders’ Hot Stocks on TipRanks)
While AVAV is in discussions with the lender for an amendment, there can be no guarantee of a successful outcome. Furthermore, if AVAV is asked to make a prepayment, then its business might see an adverse impact.
Similarly, if the company fails to make a prepayment or amend the agreement, then a default may occur and lenders could stop providing future loans under the agreement.
Wall Street’s Take
On December 8, Canaccord Genuity analyst Austin Moeller decreased the stock’s rating to Hold from Buy, with a price target of $64, which implies that the stock is fairly priced at current levels.
Consensus on the Street is a Moderate Buy based on 2 Buys and Holds each for the stock. The average AeroVironment price target of $67 implies a potential upside of 5.6%. That’s after a 30.1% slide in share prices over the past month.
Related News:
Pangaea Logistics’ CEO Passes Away; Mark Filanowski Named New CEO
Luminar Technologies Announces $250M Share Repurchase Plan; Shares Jump
Uber Exploring Non-Strategic Asset Sales – Report
