We recently published a list of Why These Defense Stocks Are Declining This Week. In this article, we are going to take a look at where Innovative Solutions and Support, Inc. (NASDAQ:ISSC) stands against other defense stocks that are declining this week.
Defense stocks were volatile last month. Shares fell sharply on February 13 after the American president suggested his country could rapidly cut military spending in the future. Trump made these comments in the context of a potential future conference with China and Russia to discuss cutting defense expenditure to spend the money in other areas.
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Trump has also vowed to end the tumultuous wars in the Middle East and Europe. The U.S. is actively engaging key players in the Middle East for an extension of the truce in Gaza. On February 17, American and Russian officials met in Saudi Arabia to discuss ending the Ukraine war.
Some analysts view his anti-war stance as detrimental to defense stocks. The creation of the Department of Government Efficiency (DOGE), which aims to reduce wasteful spending, cut unnecessary regulations, and restructure federal agencies, is also reshaping investors’ views of the sector.
Byron Callan, managing partner at Capital Alpha Partners, believes there is a high level of uncertainty in the U.S. defense sector related to current and future programs and the likelihood of severe cuts to government workforces.
According to a Financial Times report, shares of the six largest American defense companies have fallen 4% since Trump’s return to the White House. In contrast, Europe’s top defense stocks have risen by nearly 40% over the same period. While the performance of the U.S. defense sector was lagging behind Europe and Asia well before the presidential elections, the gap has widened after Trump’s victory.
Globally, defense stocks have rallied over the past two weeks as European governments faced pressures to increase military expenditure. The momentum has further picked up after a conservative victory in Germany, signaling the shift to the right in Berlin. According to a Bloomberg report, Friedrich Merz, the country’s chancellor-in-waiting, has already opened talks between the Christian Democrats and Social Democrats over a $210 billion emergency defense fund.
While some US defense stocks have benefited from the wave, there are several that have missed out and continue to slide.
Please note that the stocks listed are based on one week’s performance. Our analysis does not reflect the prospects of the company. Their share price could go high or low in the future, depending on the external market conditions, industry-specific challenges, and the company’s capabilities. Additional research and caution are advised before making investment decisions.
Our Methodology
For this article, we went through screeners to see how stocks in the aerospace and defense industry performed over the past week (February 24-28). From there, we picked the top 10 stocks with the highest percentage decline in share price during this period. All data is as of the close of business on Friday, February 28, 2025.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
An engineer in a meeting room, strategizing the future of the company’s utility management system.
Innovative Solutions and Support, Inc. (NASDAQ:ISSC)
Weekly Decline: -9.85%
Innovative Solutions and Support, Inc. (NASDAQ:ISSC) manufactures and sells advanced avionic solutions to a broad customer base, spanning commercial, military, and business and aviation markets. It is among the defense stocks that are declining this week.
As of February 28, ISSC had fallen 36% over the past month, with a major dip in the run up to and following the earnings call for the first quarter of fiscal 2025 on January 29. The slide continued throughout last week, with a 9.85% decline.
Innovative Solutions and Support, Inc. (NASDAQ:ISSC) reported net revenues of $16 million during the first quarter, representing a 70% year-over-year growth, driven by momentum from new military programs. However, gross margins were down from 59.3% last year to 41.4% during the recent quarter, due to incremental depreciation from recent product line acquisitions. Net income for Q1 stood at $700,000 or $0.04 a share. This not only missed estimates, but was also down from $1.1 million, or $0.06 per share a year ago.
Overall, ISSC ranks 9th on our list of defense stocks that are declining this week. While we acknowledge the potential of defense companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ISSC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
