AeroVironment (AVAV), Kratos (KTOS) Slide as Defense Sector Hit by Rate Fears, Iran Deal Hopes

AeroVironment (AVAV) and Kratos (KTOS) shares fell sharply in afternoon trading on June 6, 2026, as defense contractor stocks extended their 2026 underperformance, pressured by a macro repricing after a strong U.S. jobs report. Bernstein analyst Douglas Harned pinned the decline on capital rotation rather than weakening fundamentals, noting defense valuations were near record highs when the Iran conflict began. Higher discount rates from the jobs data compressed the long-duration contract cash flows that investors had priced at premium multiples. Renewed Trump administration optimism over an Iran deal further eroded the geopolitical risk premium that had supported the sector. AVAV, trading at $187.59, sits 54.2% below its 52-week high of $409.83 from October 2025, and has lost 26.8% year-to-date.