Trade Recommendation

AeroVironment, Inc (AV). designs, develops, and produces small, unmanned aircraft and fast charge systems for electric industrial vehicle batteries. The Company offers long range tracking antenna, sensors, and missile systems. AeroVironment markets its products in the United States. Product sales generate around 85% of revenue while contract services account for roughly 15%. AV sells the majority of its UxS and services to organizations within the DoD, including the US Army, Marine Corps, Special Operations Command, Air Force, and Navy, to public safety agencies and to allied governments, or to companies that serve these customers. It sells its LMS products and services to organizations within the US DoD and allied military forces. The US Army and other US government agencies generate approximately 75% of its total sales. Non-US government is responsible for the remaining approximately 25%. AV is a credible player on key capabilities in high demand right now both in the US and internationally. These capabilities, which include loitering munitions, reconnaissance drones, and counter UAS systems, seem even more important as a result of the war in the Middle East. AeroVironment is well positioned in the defense market with extensive unmanned and counter-unmanned system offerings that have already entered service. The end market is a focus of both US and allied budgets and should see significant growth in the coming years. Our 12-month price target of $400 (CMP $177) is derived from a target 9.5X 2026E price/sales, reflecting updates to our growth and margin trajectory estimates and a mark to market vs peers. Key risks include: 1) large potential program awards not coming to fruition, 2) new entrants taking market share, 3) BlueHalo integration. Stop loss to our view is $100.

Investors this week finally confronted what the data has been hinting at for a while: the US economy is showing signs of fatigue. Cracks are appearing, yet in classic late-cycle fashion, bad news may prove good news for stocks. We believe US politics and the courts could provide the next catalysts for a year-end rally. The Republican party’s losses in local government polls this week should spur the party to agree with the Democrats to end the government shutdown. Meanwhile, the US Supreme Court, in its opening questions, appears to be sceptical about the legality of Trump’s tariff. A deal to end the US government shutdown and a potential rollback of US tariffs by the top court would be positive for risk assets into year-end. Trump has shown a tendency to make major decisions before crucial holidays. With Thanksgiving on 27th Nov, we believe Trump, Republicans & Democrats don’t want responsibility for a public outcry on travel outages and food stamps availability. Hence the shutdown is nearing it’s end in our view. Solid US corporate earnings remain the fundamental driver of the equity rally. With more than 70% of S&P 500 companies now reported, profits are up nearly 13% from a year ago, almost twice the preseason forecast. Sales are rising at their fastest clip in three years, and margins have topped expectations across nearly every sector. Beat rates for both earnings and revenue are running comfortably above post-pandemic norms. On the Supreme court hearing on IEEPA, any tariff rollback would reduce the odds of a US recession and lift the chance of a soft landing. While Trump could use other short-term emergency powers to impose targeted tariffs, a major long-term headwind would be eased. This should also aid US equities by year end when we expect the SCOTUS decision on IEEPA. Summary: The S&P 500 reclaimed its 50-day moving average on Friday and both VIX and VVIX fell off recent highs, signalling calmer conditions after a jittery week. Trade Summary: Buy S&P 500 (CMP 6729), TP 7015 & SL 6545 Risks to the view: US shut down continues & Fed’s Dec rate cut probabilities go down further in absence of data.

Expedia delivered objectively strong 2Q results as Vrbo returned to growth to exit the quarter, Brand Expedia grew bookings nearly 20% Y/Y, and B2B bookings grew 20%, all supporting 10% Y/Y nights growth in the quarter, 3% ahead of the Street, while also ahead of Buy-side pessimistic estimates. Our target price at $160 based on ~15.5x our 25 GAAP EPS estimates. More over Expedia's B2B portfolio is significantly undervalued in our view. We believe current strong wealth effect in middle class US households augurs well for Expedia’s core customer target. US retail sales has been holding well & US consumer spending has remained strong even at high real neutral rates. With Fed’s 50 bps cut and likely 125 cuts in total by Mar’25, we expect US consumer spending to remain resilient supported by strong wealth effect of US equities. Hence both from a macro & company specific point of view, Expedia looks well set to reach 160 levels from CMP of 144.

Trade Synopsis: Short Nvidia Trade Recommendation: Short Nvidia (CMP 126.57), TP 105 & SL 140. Introduction: Nvidia has been the darling of US equity market investors for past 1 year. The stock had climbed almost 200% in the past year alone. But the same break neck ascent now exposes itself to a time bound correction.

Trade Synopsis: Short S&P 500 at 5000,5100,5200 with allocation of capital at 25%/25%/50% at the respective levels. Trade Recommendation: Short S&P 500 at 5000/5100/5200 in 25%/25%/50% ratio of capital, TP 4690 & SL for entire trade at 5290. Risk reward roughly 1:2.

The Hang Seng Index (abbreviated: HSI, traditional Chinese:) is a freefloat-adjusted market capitalization-weighted stock market index in Hong Kong. It is used to record and monitor daily changes of the largest companies of the Hong Kong stock market and is the main indicator of the overall market performance in Hong Kong.