Cramer: AeroVironment is drone name 'the US government favours'

Despite a volatile morning that saw AeroVironment (NASDAQ: AVAV) open “comfortably” in the green but then face a surprising intraday collapse, the narrative surrounding this “drone pioneer” remains white-hot.

Following geopolitical escalations this weekend (US air strikes that killed Iran’s supreme leader), valuation concerns and a classic “sell the news” sentiment have triggered profit-taking in AVAV on Monday.

However, famed investor Jim Cramer sees this pullback as an opportunity for long-term investors.

While AeroVironment stock is losing steam at writing, the fundamental shift toward “unmanned warfare” suggests the dip offers a compelling entry point into the Pentagon’s preferred tech partner.

Why is Jim Cramer bullish on AeroVironment stock?

According to Jim Cramer, traditional defense giants grapple with massive, slow-moving hardware projects – but AeroVironment has the ability to iterate at the speed of modern conflict.

“They can produce them (drones) fast, produce them cheap, produce them good,” he said on CNBC, adding the US government has clearly signalled its favour for this agile model.

And now that drones are evidently emerging as the weapon of this Iran war, AVAV shares are strongly positioned to regain some of the recently lost ground in 2026.

With the company trading at nearly half its share price in mid-October, the Mad Money host argued investing in it now exposes investors to a major macro tailwind while bypassing the “froth” of the peak.

Why AVAV shares may rally amid US-Iran war

Jim Cramer recommends owning AeroVironment shares as the US may seek to neutralize Iranian defense military capabilities without putting excessive boots on the ground.

And this would likely increase the demand for autonomous systems that AVAV specializes in.

In short, the escalating US-Iran war provides a grim but undeniable catalyst for the firm’s record $3.9 billion backlog – turning theoretical demand into active, high-margin deployments.

Following today’s decline, the drone maker’s 14-day relative strength index (RSI) sits at about 34, reinforcing that bearish momentum is now approaching exhaustion.

This makes its stock even more attractive to own in the near-term.

How to play AeroVironment amid rising geopolitical tensions

The bull case for AVAV stock rests on its unique position as a “software-first” hardware company.

While today’s price drop reflected fears over the BlueHalo integration costs and a high P/E ratio, the strategic reality is that the US military is currently starving for the exact solutions AVAV offers.

Cramer’s endorsement centers on the idea that AeroVironment is the “less expensive way” to play the defense sector, as its drones offer a higher “kill-to-cost” ratio than multi-million dollar missiles.

What’s also worth mentioning is that AVAV is scheduled to report its Q4 earnings later this week.

Consensus is for it to earn 71 cents per share – well over double the 30 cents it earned in the fourth quarter of last year.

And if its guidance and management’s commentary signalled commitment to turning geopolitical chaos into sustainable profitability, AeroVironment stock could push much higher from here in the near-term.