Is AeroVironment (AVAV) Shifting Its Risk Profile With The SCAR BADGER Contract Renegotiation?

Simply Wall St.01-22

In January 2026, the U.S. Government and AeroVironment mutually issued a stop work order on the BADGER phased array antenna systems contract for the SCAR satellite communications program to ...

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This pause highlights how changing government program requirements can alter contract structures and risk-sharing, while AeroVironment still expects to support SCAR with future capabilities and products. Next, we’ll examine how the contract pause and shift toward a firm-fixed price structure shape AeroVironment’s broader investment narrative. Explore 23 top quantum computing companies leading the revolution in next-gen technology and shaping the future with breakthroughs in quantum algorithms, superconducting qubits, and cutting-edge research.AdvertisementWhat Is AeroVironment's Investment Narrative?To own AeroVironment, you need to believe in its role as a specialist supplier of unmanned systems, counter-drone technologies and related mission solutions to U.S. and allied defense customers, even while the company remains loss-making and relatively expensive on sales multiples. The SCAR BADGER stop-work order fits squarely into that thesis: it underlines how dependent AeroVironment is on evolving U.S. Government requirements, but also that key programs can be reshaped rather than abandoned. The expected move to a firm-fixed price structure could trim upside on that contract, yet the sharp share price drop around the announcement suggests the market may be treating a contract reset as if it were a full program loss. Near term, the bigger swing factors still look like execution on the large Army IDIQ awards and path back to profitability, with the SCAR development adding another layer of contract-structure risk to watch. However, investors should not ignore how changing contract terms might affect AeroVironment’s future economics.\n\nDespite retreating, AeroVironment's shares might still be trading above their fair value and there could be some more downside. Discover how much.Exploring Other PerspectivesAVAV 1-Year Stock Price Chart Seven Simply Wall St Community fair value estimates span roughly US$280 to US$450 per share, reflecting very different views on upside. That diversity matters when you set expectations around contract uncertainty, margin pressure from firm-fixed arrangements, and AeroVironment’s effort to move from losses toward sustained profitability.Explore 7 other fair value estimates on AeroVironment - why the stock might be worth 13% less than the current price!Build Your Own AeroVironment NarrativeDisagree with this assessment? Create your own narrative in under 3 minutes - extraordinary investment returns rarely come from following the herd.A great starting point for your AeroVironment research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.Our free AeroVironment research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate AeroVironment's overall financial health at a glance.No Opportunity In AeroVironment?Our top stock finds are flying under the radar-for now. Get in early:Rare earth metals are an input to most high-tech devices, military and defence systems and electric vehicles. The global race is on to secure supply of these critical minerals. Beat the pack to uncover the 31 best rare earth metal stocks of the very few that mine this essential strategic resource.Find companies with promising cash flow potential yet trading below their fair value.AI is about to change healthcare. These 109 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10b in market cap - there's still time to get in early.  This article by Simply Wall St is general in nature. We provide commentary based on historical data\n    and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your\n    financial situation. We aim to bring you long-term focused analysis driven by fundamental data.\n    Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.\n    Simply Wall St has no position in any stocks mentioned.New: Manage All Your Stock Portfolios in One PlaceWe've created the ultimate portfolio companion for stock investors, and it's free.• Connect an unlimited number of Portfolios and see your total in one currency• Be alerted to new Warning Signs or Risks via email or mobile• Track the Fair Value of your stocksTry a Demo Portfolio for FreeHave feedback on this article? Concerned about the content? Get in touch with us directly. 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