The number of pure play drone stocks is shrinking, since Lockheed Martin (LMT) agreed to buy Aerojet Rocketdyne (AJRD). There aren’t many other drone stocks to choose from.
Drones are a technological advancement that have been sometimes been making headlines for all the wrong reasons. They have been spotted flying too close to airports, and they have been caught smuggling drugs into prisons. They have even been used to spy on neighbors that are sun bathing in the nude in their backyard. When used in the right wy, drones are a great form of technology. They are helping businesses to make great strides and stay ahead of the competition, and have significant usage by the military.
Drones may soon be used by businesses that provide goods to customers. They will be able to deliver customers’ packages right to their very own doorstep on a regular basis, and on a large scale. This will greatly change the world of home deliveries. No longer will customers have to go through the hassle of picking their goods up from a store. This would bee a great advantage during the pandemic.
This form of technology is also being used by oil and gas companies. It allows companies to do routine inspections. The drone will also be able to do surveying for a variety of other businesses. All in all, these will work to make the lives of businesses easier.
Of course, drones are even available for recreational use. There are several rules that a person must abide by, however, such as not be flown in close proximity to an airport. Plus they must be registered.
So how does an investor take a flyer on a drone stock that won’t crash and burn? One of the purest plays in the drone industry is AeroVironment (AVAV), which produced the Pointer drone in 1987, considered to be the first small unmanned aircraft system, also referred to as a UAS, unmanned aerial vehicle, and UAV, for military use. The company now makes severals UASs, including the Puma, Raven, Wasp, and Shrike, for business and governmental use.
AeroVironment is currently trades at 110 times trailing earnings, and 53 times forward earnings. In spite of the high P/E ratio, the company does have a couple things going for it. First of all, it has no long term debt. Second, the company is sitting on $302.6 million in cash, amounting to $13.41 cash per share. No wonder the stock is up over 12% today.
AgEagle Aerial Systems (UAVS) is another drone company that markets to the agricultural industry. It is currently generating negative earnings, but it debt free.The stock is up over 22% today.
Another way to play the drone market, although in a small way, is Amazon (AMZN), which is involved in drones two different ways. It is developing Amazon Prime Air in several countries, which will provide 30 minute delivery services using small drones. In addition, Amazon actually sells drones to the consumer. Do you think if I order a drone from them, that they would deliver it by drone?
Keep an eye on this industry, because there is great potential for drone stocks to go higher and higher.
Disclosure: Author owns AMZN.