Key Points:
- BTIG analysts selected AeroVironment and Leonardo DRS as top stock picks.
- The White House requested a massive $1 trillion defense budget for 2026.
- NATO countries are raising their defense spending to 5% of their GDP.
- AeroVironment recently secured an $874 million contract for unmanned systems.
Industrial companies had a mixed year in 2025, but analysts at BTIG believe the defense sector is poised for major growth in the first half of 2026. With global tensions rising, governments are pouring money into military technology. The White House has requested a staggering $1.0 trillion national defense budget for the fiscal year 2026. Additionally, NATO nations are boosting their spending targets to 5% of their GDP. This flood of funding is great news for companies that build drones and electronic warfare systems.
BTIG named AeroVironment (AVAV) as its top choice for large companies. Although the stock dipped recently after a quiet earnings report, it still had a strong 2025, jumping 57% in value. Investors are excited about the company’s recent acquisition of BlueHalo and its dominant position in the drone market.
AeroVironment recently won a massive $874 million contract from the U.S. Army. This deal focuses on selling unmanned aircraft and “Switchblade” loitering munitions to international allies. Their Titan system, which detects and stops enemy drones, is also a high-profit product. BTIG set a price target of $415 for the stock, suggesting it has plenty of room to grow from its current price of roughly $241.
For smaller and mid-sized companies, BTIG picked Leonardo DRS (DRS). This stock struggled last year, gaining only 6% while the wider market grew much faster. The company faced higher research costs and rising prices for germanium, a rare metal used in weapon sights, after China cut off exports.
However, analysts believe the worst is over. Leonardo DRS is securing new sources for materials, including recycling old optics. The company also just won a subcontract to provide infrared sensors for a missile defense program in space. BTIG set a price target of $50, offering a significant potential gain from its current trading price of around $34.
Both companies sit in the sweet spot of modern warfare. As the U.S. and its allies focus on unmanned systems and advanced sensing, these firms are ready to supply the necessary technology.
