Government aircraft manufacturer AeroViroment Inc (NASDAQ:AVAV) is trading slightly lower ahead of its second-quarter earnings report, slated for release after the close tomorrow, June 25. The stock has suffered on the charts since a post-earnings surge in early March had AVAV touching three-month highs. Since this peak at $95.38, the equity has lost nearly 34%, now perched right below the $64 region. AeroViroment's last eight post-earnings moves, however, might suggest some redemption is coming for the stock, if history is any indicator.
Specifically, AVAV was higher one day after six of the past eight earnings reports, averaging a 14.3% swing in either direction -- with its biggest pop coming in at 25.9% in January 2017. This time around the options market is pricing in a post-earnings move that's just about in line with this average, at 14.4%.
While some traders have been cooling to AVAV, the options market has been a bit more bullish. Today, 244 calls have crossed the tape today, two times what's typically seen at this point. The July 85 call is by far the most popular, with selling action seemingly taking place here.
Should tomorrow's results prove favorable, some analysts might start coming around to AVAV. Right now, only one broker in coverage considers the equity a "strong buy" while six say it's a "hold." The consensus 12-month target price, on the other hand, sits all the way up at $74.60 -- a region AVAV hasn't touched since mid-March.
An unwinding of shorts could push the stock higher, too. While short interest fell slightly during the last two reporting periods, the 2.81 million shares sold short still represent 13.1% of the stock's available float. At its average pace of trading, it would take more than 12 days to cover all these bearish bets, leaving plenty of room for a short squeeze.