Key Takeaways
- AEVEX shares fell 16% today after Bloomberg reported that the U.S. Navy has stopped ordering the company’s GARC drone boats, after spending more than $130 million on them.
- The boats come from BlackSea, which AEVEX bought in September in a deal valued at up to $650 million. That puts a big recent acquisition in question.
- Analysts expect revenue to grow from $760 million in fiscal 2026 to $1.06 billion in fiscal 2028, and those estimates were made before the Navy’s decision.
- AEVEX’s next earnings report should show how much of BlackSea’s sales the GARC made up.
AEVEX (AVEX) sank 16% this morning after Bloomberg reported late Tuesday that the U.S. Navy has stopped buying its drone boats.
What exactly happened
According to Bloomberg, the Navy “will no longer buy a highly prized — but ultimately troubled — drone speedboat” made by AEVEX’s BlackSea unit, after spending more than $130 million on it.
A person briefed on the matter told Bloomberg that the Navy suspended new orders for the Global Autonomous Reconnaissance Craft (GARC) for two reasons: limits in the boat’s hardware, and cheaper alternatives such as one-way attack drones. The decision came after the Navy’s program office commissioned an independent review.
Which, ouch.
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A big piece of a brand-new deal
The timing is what makes this hurt. AEVEX bought BlackSea only in September, in a deal valued at up to $650 million. That’s about a third of what the whole company was worth at Tuesday’s close.
And the company says it has delivered more than 300 of these boats to the military, so the GARC was a major product for BlackSea.
Analysts were expecting plenty of growth from here.
That’s roughly 20% growth in fiscal 2027 and about 16% in fiscal 2028. AEVEX hasn’t said how much of BlackSea’s sales come from the GARC, so it’s hard to size the hole yet. But these estimates were set before the Navy pulled back, and I’d expect revisions to go down from here.
The market had also been paying up for that growth since the IPO.
The money hasn’t gone anywhere
The Pentagon has asked for $54 billion in the upcoming fiscal budget to expand unmanned systems. So the Navy still wants drones. It’s just found cheaper ones that do the job, according to Bloomberg’s source.
Plus, this hits a stock that’s already the target of a class action alleging that its IPO documents hid a plan to waive the 180-day lock-up.
My take: the drop is fair until AEVEX says how much of BlackSea’s revenue and backlog depended on the GARC. A product the Navy no longer wants is hard to square with a $650 million price tag.
Of course, this report rests on unnamed sources, and AEVEX’s next earnings report is where we’ll learn how much the GARC really matters.
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