Red Cat Holdings Inc. (RCAT:NASDAQ) just garnered analyst coverage by ThinkEquity which initiated on it with a Buy rating and an $8 per share price target, reported analyst, Dr. Ashok Kumar, in an August 8, 2022 research note. Red Cat's current share price, in comparison, is around $2.38 per share.
Kumar presented the reasons this Nevada corporation warrants a Buy recommendation.
Red Cat is "positioned to capitalize on the drone market with high-performance products, business services and technologies for various related industries," Kumar highlighted. In other words, with its four complementary operating subsidiaries, Red Cat is in a place where it can continue moving beyond just selling other manufacturers' drones and drone components.
One of Red Cat's subsidiaries, Dronebox, the company developed in-house. Dronebox also is the company's product candidate and potential software-as-a-service offering that tracks, records and analyzes a drone's flight data and other information and stores it in the cloud, all securely.
"Red Cat's drone-as-a-service business model will be a driver of the company's growth," Kumar wrote.
Red Cat's other subsidiaries are companies it acquired:
Skypersonic (acquired May 2021), the developer and builder of the Skycopter drone for industrial inspections and creator of the Skyloc indoor GPS positioning system.
Fat Shark Holdings (acquired November 2020), manufacturer and seller of headsets and goggles for professional, first-person view racers and drones.
Rotor Riot (acquired January 2020), designer and online seller of first-person view and drone racing hardware to consumers through rotorriot.com.
Kumar highlighted that Red Cat leveraging these various business lines affords its competitive advantages. For example, the company can combine Skypersonic's remote piloting technology
with Fat Shark's digital video system to provide differentiated systems. Also, Rotor Riot "can scale a U.S.-manufactured drone solution for various variety of inspection activities," the analyst wrote.
Another of Red Cat's strengths, according to Kumar, is its discipline in targeting and choosing companies for acquisition, only those with "advanced product offerings, specialized drone operational platforms, and intellectual property."
This focus can be ascribed, in part, to the expertise of Red Cat's management team, the members of which, Kumar pointed out, have collective experience in the technological and financial arenas.
Regarding the market opportunity for Red Cat moving forward, Kumar provided some statistics that suggest continued growth is expected for the drone industry. The number of "Internet of Things enterprise drones" to be shipped is expected to reach 4.1 million (4.1M) by 2029, up from 0.5M in 2019. Most of those unmanned aerial vehicles are forecasted to go to North America and be used primarily for construction monitoring and retail sales.
The investment bank, ThinkEquity, expects Red Cat to increase revenue to $38.8M in the fiscal year 2023 (FY23), up from an estimated $16.4M in FY22 and $4.9M in FY21. In the near term, the Fat Shark subsidiary is expected to generate the greatest revenue for Red Cat.
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Disclosures:
1) Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
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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.
This report is for information purposes only. Under no circumstances is it to be used or considered as an offer to sell, or a solicitation of an offer to buy any security. While the information contained in this report has been obtained from sources believed to be reliable, we have not independently verified the information and we do not represent or guarantee that the report is accurate or complete and it should not be relied upon as such. Any references or citations to, or excerpts from, third-party information or data sources (including, but not limited to, Bloomberg and Capital IQ) do not and are not intended to provide financial or investment advice and are not to be relied upon by anyone as providing financial or investment advice. Based on public information available to us, prices and opinions expressed in this report reflect judgments as of the date hereof and are subject to change without notice. The securities covered by or mentioned in this report involve substantial risk and should generally be purchased only by investors able to accept such risk. This research report and the securities mentioned herein, some of which may not be registered under the Securities Act of 1933, are intended only for Qualified Institutional Buyers (QIBs), as defined under Rule 144A. Any opinions expressed assume that this type of investment is suitable for the investor.
