Al Root

The Ukraine-Russia war has become an incubator of new technology that will change warfighting for generations. Low-cost drones have transformed battlefield surveillance and tactics, dramatically ramping up risks to infantry and equipment.

The recent " Spiderweb" operation, in which Ukraine smuggled weaponized drones deep into Russia this past weekend, successfully destroying billions of dollars worth of Russian bombers, is the latest example.

"The creativity of the Ukrainian strike should get countries thinking much harder about sheltering combat aircraft and defense against short-range unmanned aerial systems," wrote Capital Alpha Partners analyst Byron Callan in a recent report. "That will cost money."

Some of that money should eventually flow to defense technology company AeroVironment, which has expertise in drone and drone defense technology. The company's product "portfolio is strategically aligned to high-growth areas of U.S. and global defense spending," wrote William Blair analyst Louie DiPalma in a Wednesday report.

AeroVironment makes Switchblade guidable munitions -- essentially kamikaze drones -- and Puma surveillance drones that scout the battlefield and enemy positions. The company is merging with BlueHalo, which produces counter-drone technologies, such as detection, lasers, and signal jamming.

"We remain positive on shares, as drones are a listed priority of the new administration," added DiPalma. He rates shares Buy. He doesn't have a price target for shares.

Overall, 88% of analysts covering AeroVironment stock rate shares Buy, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target for AeroVironment stock is about $188 a share.

AeroVironment stock was down 2.6% in early trading Wednesday at $181.25, while the S&P 500 and Dow Jones Industrial Average were 0.3% and 0.2%, respectively. Coming into Wednesday trading, shares were up almost 6% over the past week.

There is a Newton's Law-like principle in war that every action by a foe generates a reaction. After low-cost weaponized drones come drone defense and, eventually, more capable drones. The drone arms race is on.

Write to Al Root at allen.root@dowjones.com

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June 04, 2025 10:46 ET (14:46 GMT)

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