Why Aerovironment's Shares Crashed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of unmanned vehicle maker AeroVironment fell as much as 22% in early trading after releasing its fiscal third quarter earnings report.

So what: Revenue fell 34.6%, to $47.1 million in the quarter, which was well below the $89.2 million analysts expected. On the bottom line, profit fell from $5.7 million a year ago, to $3.9 million, or $0.17 per share, which was less than half of the $0.37 estimate from Wall Street.

Now what: There was about $100 million of revenue that slipped from fiscal 2013 to fiscal 2014, according to management. That resulted in this quarter's weakness, and a fiscal forecast that was more than $100 million below its previous estimate. Slower than expected government spending is accounting for most of the miss, and I don't expect that pressure to ease up. Long-term, I think the company is a good business, but until the stock is a screaming buy, I'm going to sit on the sidelines. I think there's still 25%+ of downside as the market adjusts expectations.

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The article Why Aerovironment's Shares Crashed originally appeared on Fool.com.

Fool contributor Travis Hoium has no position in any stocks mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw. The Motley Fool recommends AeroVironment. The Motley Fool owns shares of AeroVironment. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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