Drone technology continues to be in liftoff mode in the first quarter of 2024. What’s more, total global revenue for the drone market is $4.3 billion and is expected to grow at a compound annual rate of 2.3% through 2028, according to Statista.
If you’re interested in investing in drone stocks, it helps to know some of the industry lingo, such as “hexacopter” or “obstacle sensing systems.” But what’s most important is focusing on the industry players who’ve developed real-world applications for drone technologies that should turn a profit.
Start with these seven highfliers that have the potential to take off in 2024:
AMZN stock has been popping after Goldman Sachs projected that Amazon will be one of a handful of companies issuing a combined $1 trillion in stock buybacks in 2025. Meanwhile, the company also has a strong drone tech story to tell.
It was barely a decade ago when then-CEO Jeff Bezos began laying out a drone vision forged in a real-world, profit-making strategy, aiming to deliver goods to customers quickly, efficiently and cheaply. In 2024, that strategy is finally bearing fruit.
After testing drone deliveries in Lockeford, California, and College Station, Texas, Amazon is readying an as-yet-unnamed U.S. drone-delivery location and adding two more sites in Europe. Amazon’s Prime Air program is pivoting to smaller and quieter drone models with the six-rotor MK30. This faster, lighter, rain-accommodating drone should be available in the company’s three testing sites, as well as cities in Italy and the U.K., later in 2024.
Amazon drones are expected to operate out of the same inventory facilities as the company’s delivery trucks, offering Amazon customers a new delivery experience.
With a robust order pipeline and after receiving the world’s first type certification for unmanned electric vertical takeoff and landing aircraft from China’s Civil Aviation Administration, EHang seems ready to shake off poor stock performance into the second quarter of 2024.
The company recently put a $410,000 price tag on its EH216-S unmanned aircraft for early April, and it says it’s ready to meet its customer pipeline demand for approximately 100 aircraft on a 2025-to-2027 timeline.
The company has also shaken off the “Star Wars-like flying cars” sentiment in the media and is hammering away at the possibilities for pilot-less vehicles thriving in transport sectors like aerial tourism, airport shuttles, and consumer and commercial deliveries.
So-called flying cars have the potential to disrupt global transportation, and finally the industry is starting to attract attention in global financial markets. While still in its infancy, this specialty area is estimated to grow to $1.5 trillion by 2040, up from $255.4 million in 2022, according to Fortune Business Insights. That represents an explosive compound annual growth rate, or CAGR, of 58.1%.
In November, the average 12-month price target for EH stock was revised to $31.11, an increase of 29.8% over the previous month, according to Fintel. EH stock closed at $14.48 on March 12.
Kratos Defense & Security Solutions Inc. (KTOS)
Kratos, based in Round Rock, Texas, has seen its stock wither over the past quarter: It’s down 11.6% on a year-to-date basis after a Feb. 21 announcement that it planned a $300 million common stock offering, which will dilute existing shareholders.
But Kratos has reason for optimism going forward. The company says it will plow the new stock-offering proceeds into necessary facility upgrades and bolster its balance sheet. Kratos is expected to have steady, 10.3% growth in sales through 2025, according to FactSet data.
The company, which provides mission-critical unmanned aerial systems products, services and solutions for U.S. military defense and national security companies, shone in the fourth quarter. Adjusted fourth-quarter earnings rose by 50% year over year to 12 cents per share, and Kratos reported fourth-quarter revenues of $274 million, an increase of 9.8%.
Recent contracts with the U.S. Navy (for $22.9 million) and the U.S. Space Force’s Space Systems Command (up to $579 million) show that Kratos already has robust connections with the government. Additionally, the Israel-Hamas conflict in the Middle East and the Ukraine-Russia war have boosted military drone stocks, and Kratos is a big beneficiary.
Wall Street analyst Josh Sullivan refers to the scenario as the “emergence of high-attrition warfare” and calls for a $25 target price on KTOS, which closed at $17.93 on March 12.
AeroVironment Inc. (AVAV)
This Arlington, Virginia-based developer of unmanned aircraft systems and electric transportation solutions is on the right flight path in 2024. Its stock price is up 28.5% year to date, and its fiscal third-quarter numbers significantly outperformed, with adjusted earnings per share of 63 cents that doubled Wall Street estimates.
AeroVironment raised its expected fiscal-year revenues to a range between $700 million and $710 million, up from previous guidance of $685 million. Guidance for fiscal-year earnings per share is also on the rise, with AVAV issuing guidance figures of $2.69 to $2.83, up from an earlier range of $2.46 to $2.70.
William Blair analyst Louie DiPalma issued a “buy” call on AeroVironment stock in a March 5 research note, citing “the elevated geopolitical climate and AeroVironment’s success thus far in Ukraine, as we believe a large number of prospects in the pipeline funnel will convert to bookings.”
The company recently stated that more robust AI-based unmanned systems controls will boost drone performance and contribute to revenue growth going forward. Simultaneously, the Israel-Hamas military conflict should boost AVAV’s share price, as would a prolonged war in Ukraine, where AVAV’s Switchblade drones are frequently used as smart artillery devices.
Boeing’s share price is down significantly in 2024, off 29.3%, as the air transport manufacturer undergoes an audit from the U.S. Federal Aviation Administration related to the Boeing 737 Max 9 door plug blowout on Jan. 5 during an Alaska Airlines flight. Not helping matters is a recent New York Times report that Boeing failed 33 of 89 FAA product audits.
Boeing’s admission that it’s cutting 737 Max 8 deliveries to Southwest Airlines Co. (LUV) from 56 to 48, after citing a slowdown in production, is equally downbeat. Ongoing supply chain issues and fluctuations in top management posts have also been problematic.
Still, Boeing continues to win contracts, recently landing a $94.5 million deal with the Naval Air Systems Command F/A-18E/F and EA-18G aircraft. Seaport Research Partners analyst Richard Safran says the supply chain headaches “should abate in the second half of 2024,” boosting the production numbers on Boeing’s 737 Max airplane once it clears the FAA audit.
Investors should know that there aren’t many established pure-play drone companies that exist just yet, so BA stock is more a bet on the defense industry and the growth of air travel than the growth of drones.
Joby Aviation Inc. (JOBY)
Despite a downward trend in its share price in 2024, Joby continues to plow ahead with its air taxi development. The company recently announced an exclusive deal with Dubai that gives Joby air taxi rights for six years starting in 2025. Additionally, Joby says aviation regulators should clear its electric vertical takeoff and landing, or eVTOL, aircraft certification next year.
Clearly, it’s the technology that’s driving Joby forward. Its flagship air taxi can carry five occupants at speeds close to 200 miles per hour, cutting the flight time from Dubai International Airport to Palm Jumeirah, the country’s famed artificial archipelago, from 45 minutes to 10 minutes.
The market prospects for so-called flying cars look promising, and that’s a good sign for early-arrival companies like Joby. Morgan Stanley has estimated that the aerial vehicle market could exceed $1 trillion by 2040.
Northrop Grumman Corp. (NOC)
Like Boeing, Northrop Grumman is busy winning defense industry drone contracts, including a recent deal to build state-of-the-art drones for the U.S. Navy.
The aviation industry is also buzzing over Northrop Grumman’s unpiloted stealth RQ-180 drone that is “invisible to enemy radars, infrared sensors and acoustic detectors, and (able) to fly at high altitudes and long ranges,” according to the company.
The RQ-180 reportedly could add $100 billion to Northrop Grumman’s 2015 $200 billion B-21 bomber contract with the U.S. Air Force. The drones are already in significant demand as support aircraft for the new $750 million (per plane) B-21 Raiders being built by Northrop.
Trading at $458.84 per share as of March 12, NOC also offers a decent dividend, with a current forward yield of 1.6%.
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