Drone Maker Surges on Analyst Optimism, New “Switchblade” Drone
Daily Stock Market Primer
The market is beginning to feel like clockwork: alternating days of big rallies and substantial selloffs just keep coming. Today is no exception. Stocks surged yesterday after a speech by Chinese President Xi gave investors hope for a more conciliatory international trade environment. But, today, saber-rattling between the US and Russia concerning the situation in Syria is sending markets back into negative territory. The US is planning airstrikes to retaliate for the recent use of chemical weapons by the Syrian government, a Russian ally.
As long as this sort of geopolitical environment persists, it’s hard to see this volatile trading fading anytime soon. In fact, news-based traders are poised to benefit: higher volatility is actually associated with an increased margin between news-based strategies and more old-fashioned approaches. Why? Because, equipped with quantitative trading strategies backed by real-time analysis platforms, news-based traders don’t need to predict the overall direction of the market. Instead, they use news-events to profit from trading momentum—no matter the direction.
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Today’s Top Performer: AeroVironment, NASDAQ:AVAV
Sometimes, our Top Performers happen to fit the day’s market narrative perfectly. Increased tensions in the Middle East and elsewhere is driving interest in defense stocks. And today’s Top Performer makes drones.
AeroVironment manufactures reconnaissance and surveillance UAV’s (unmanned aerial vehicles) for both the commercial and military markets. Today, Stifel’s influential analyst group upgraded AVAV to a “Buy,” increasing its price target to $65. Stifel points to an almost unprecedentedly lucrative 10-year project pipeline for the aerospace firm.
Stifel believes AVAV’s “Switchblade” could command upwards of $300 million per year in revenue if the US DoD continues accelerating its purchases of unmanned combat aircraft, as expected. The Switchblade is a small, missile-like UAV that can be carried in the backpack of an infantry soldier. It can then be launched to provide highly localized reconnaissance (full GPS and video suite) and precision strike capabilities (via modular munitions). The Switchblade could fill a new potential niche among UAV’s: it is much smaller and more expendable than traditional full-size drones, an essential feature for low-altitude operations in a combat zone (and for a drone doubling as a missile).
Investors are buying into Stifel’s analysis: the stock is up 17% at the time of this writing. If their analysis is correct, it could still have substantial room to run.
Keep checking our blog for a small sample of the huge array of profitable stock plays available to our members every week. Yesterday, we profited on gold. Monday, it was video game accessories. Today, it’s military drones. News-based approaches truly leave no stone unturned in the hunt for profits.