EXITING $AVAV (AEROVIRONMENT) WITH PROFIT
February 20, 2010
We are buying to cover $AVAV. Friday’s closing price is $25.33. Our original short was based on the thesis that drone business has become more competitive and margins are declining while the Wall Street stays enamored with the apparent sexiness of drones killing terrorists.
FY2011 defense budget submission creates more uncertainties for $AVAV. Based alone on its defense business, we would have stayed short on the stock. However, based on the hype surrounding home charging stations for LEAF electric car from Nissan, it is prudent to take advantage of recent sell off and cover the position. Earlier, we took advantage of the hype to add to our short position. Should the stock move up again on hype, we will short it again. Technically speaking, home charging stations are simple devices and likely to be commoditized quickly. As for the existing agreement with Nissan, Nissan is projections sale of only 5000 LEAF cars, not meaningful to AVAV numbers.
4 Responses to “EXITING $AVAV (AEROVIRONMENT) WITH PROFIT”
**50,000** Nissan Leafs in the 1st full year of production, not 5000.
I will check into it. You may be right.
My information is that Nissan is firmly committed to introducing only 5000 Leaf cars in the 2nd half of 2010 and then rapidly increasing capacity to 150,000 units. If this info is correct, then the firm numbers for AVAV for 2010 will be only 5000 stations
If the horizon is limited to actual revenue results for this year, then I concur that Nissan (or anything EV) is not meaningful to the AVAV bottom line for CY'10. In 2011-2012, with additional automotive OEMs signing up and the ramp-up a fast charge infrastructure, the EV charging side could very well double the revenue of the company.
I agree with you that there is potential over longer period. My analysis was very focused on near term numbers.
Problem in the long run is that there are no barriers to entry, as charging stations are technically very simple devices that can be easily assembled using off the shelf components