Stocks To Buy And Watch: AVAV Stock Up 20% In November As Drones In High Demand

AeroVironment (AVAV) is among the top stocks to buy and watch. The drone maker is expected to post strong year-over-year earnings growth in its upcoming earnings release scheduled for Dec. 5, after the market closes. Shares rallied substantially in recent weeks, with a 20% gain for the month of November.

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Arlington, Va.-based AeroVironment sells intelligence, surveillance and reconnaissance drones, as well as loitering munitions drones.

AeroVironment is currently well positioned to benefit from increasing defense budgets around the world. The company is seeing an order pileup from Ukraine and the U.S. amid the Russia-Ukraine war. Israel has also been a source of demand recently.

AeroVironment: Drone Portfolio In High Demand

In September, Chief Executive Officer Wahid Nawabi said the U.S. Army awarded AeroVironment a Switchblade 600 contract for the Ukraine Security Assistance Initiative. Switchblade 600s are also known as suicide drones because they smash into their targets and explode.

On its most recent earnings call, AeroVironment also noted a $42 million contract to provide Ukraine with its Jump 20 drones. These surveillance drones can carry armed payloads, such as Switchblade loitering munitions.

Recently, Lithuania also placed an order for Switchblade 600s, while France has ordered the smaller Switchblade 300s.

AeroVironment says its order backlog surged to $539.7 million at the end of its most recent fiscal first quarter. That was up more than 27% from $424.1 million three months earlier. That backlog is expected to grow to $600 million for the October-ended quarter, according to FactSet.

As for its earnings to be released Dec. 5, analysts expect EPS of 62 cents per share for the October-ended quarter. Sales are expected to reach $170.90 million, up from $111.60 million in the same quarter a year earlier.

AVAV A Top Stock To Buy And Watch

AeroVironment scored a breakout from a 123.34 cup-with-handle buy point in early November. Shares are now extended from the buy point and on their way to the 20% profit zone. The stock is trading nicely above its 10-day, 21-day and 50-day moving averages.

The relative strength line appears to be nearing highs as well, a sign of strength. After five straight up-weeks in a row, the stock is now facing a hurdle of resistance at the 143 level. Back in early 2021, shares hit a high of around 143 before backing off substantially.

Other technical positives for the stock include an A Accumulation/Distribution Rating and a growing number of funds that own the stock. The number of funds reached 417 in the most recent quarter, up from 390 in the December-ended quarter.

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