Red Cat Holdings Inc. (RCAT:NASDAQ) could break even in Q4 of fiscal year 2023 (FY23), ending next April, with an estimated revenue of $8 million ($8M)," purported ThinkEquity analyst Dr. Ashok Kumar in an August 8, 2022 research note. For the entire FY23, the investment bank projects Red Cat will generate $19.3M of revenue, up from $6.4M in FY22.
"The forecast revenue growth is an indication of how the company is gaining traction across all of its subsidiaries as drone technology becomes more pervasive," Kumar added.
Red Cat provides products, services and solutions to the drone industry through its four subsidiaries. Its newest subsidiary, acquired a year ago, is Teal Drones, which sells drone systems commercially and to governments. It is one of a handful of companies qualified to sell to the U.S. Department of Defense. Since the transaction closed, Kumar explained, Red Cat has expanded Teal Drones' staff and facilities in preparation for upcoming revenue generating opportunities.
Today, "the Teal Drone[s] production line is in full swing and producing high-quality drones," Kumar relayed. "The company expects to go into mass production in the fall with a new camera payload."
Teal Drones is now fulfilling an order from a NATO country for 15 Golden Eagle drones, the subsidiary's unmanned aerial vehicle approved by the U.S. Department of Defense for reconnaissance, public safety and inspection, according to Kumar.
The analyst pointed out the subsidiary also finished developing, in partnership with Autonodyne, a next generation drone system, which gives Teal Drones and, thus Red Cat, a competitive advantage.
The four-drone system will come in two configurations: 4-Ship and 4-Ship+. With both, one pilot can control up to four Golden Eagle drones for a full 360-degree view. The 4-Ship+ version will include two extra Golden Eagle units so the pilot can swap out two with drained batteries for two with fresh batteries. The 4-Ship+ configuration also will include an additional linked controller so the pilot can give another pilot control.
"We believe that 4-Ship is a disruptive technology that alters the approach to intelligence, surveillance and reconnaissance," Kumar noted.
Kumar also indicated Red Cat is set financially to keep pursuing its growth programs throughout the rest of FY23. The company had $49M in cash and marketable securities and less than $2M in debt at the end of FY22, or April 30, 2022.
Regarding the market opportunity for Red Cat moving forward, Kumar provided some statistics that suggest continued expansion is expected for the drone industry. The number of "Internet of Things enterprise drones" to be shipped is estimated to reach 4.7M by 2031, up from 1M in 2021. Of this total, most of the UAVs are to be used primarily for construction monitoring and retail sales, and at least 25% are forecasted to go to North America.
"Red Cat is well-positioned for the domestic opportunity," wrote Kumar.
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Disclosures for Think Equity, Red Cat Holdings Inc., August 8, 2022
Analyst Certification: The analyst, Ashok Kumar, responsible for the preparation of this research report attests to the following: (1) that the views and opinions rendered in this research report reflect his or her personal views about the subject companies or issuers; and (2) that no part of the research analyst’s compensation was, is, or will be directly related to the specific recommendations or views in this research report.
The analyst, Ashok Kumar, has no financial interest in the debt or equity securities of the subject company of this report. Further, no member of his
household has any financial interest in the securities of the subject company. Neither the analyst, nor any member of his household, is an officer, director, or advisory board member of the issuer(s) or has another significant affiliation with the issuer(s) that is the subject of this research report.
The analyst has not received compensation from the subject company. The CEO of ThinkEquity, LLC., owns shares in the company. At the time of this research report, the analyst does not know, or have reason to know, of any other material conflict of interest.
Company Specific Disclosures: ThinkEquity, LLC is a member of FINRA and SIPC. ThinkEquity, LLC or an affiliate has a client relationship with and has received compensation from this subject company Red Cat Holdings, Inc. in the last 12 months.
ThinkEquity, LLC is a member of FINRA and SIPC. ThinkEquity expects to receive or intends to seek investment banking business from the subject company in the next three months. ThinkEquity does not make a market in the securities of the subject company of this report at the time of publication. ThinkEquity does not hold a beneficial ownership of more than 1% or more of any class of common equity securities of the subject company.
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