Volatus Aerospace Corp. (VOL:TSX; VLTTF:OTCQB) is expected to post better financial results in Q2/23 than in Q1/23, reported Echelon Capital Markets analyst Rob Goff in a quarter preview note dated July 31.
We "expect to see improvements in Q2/23" after a tough Q1/23, during which some revenues were delayed and others were lost due to headwinds, Goff wrote. "We note the company's prior reference to a robust sales pipeline where we are optimistic that it will secure significant wins."
Projected Return of 283%
As such, Echelon maintained its Q2/23 forecasts and its CA$0.90 per share target price on Volatus, currently trading at about CA$0.24 per share.
The difference between these prices implies a material return for investors of 283%.
Volatus remains a Speculative Buy.
Original Guidance Unchanged
What bodes well for Volatus in Q2/23 and H2/23, wrote Goff, is that management, post Q1/23, reiterated its previously stated guidance for full-year 2023: US$52 million (US$52M) in revenue and US$16.6M of gross profit with a 32% margin.
"In 2023, Volatus expects to generate US$10–12M in recurring revenue from oil and gas contracts compared to US$9M in 2022," Goff added.
Management expects to achieve these numbers thanks to the company's large, outstanding requests for proposals (RFPs), increased military sales, and the capacity to commercially leverage some of its technologies.
Also, Volatus has been tackling and trying to work around the various headwinds it faced in Q1/23. Echelon would like to see confirmation, in Volatus' Q2/23 results, that the drone solutions firm has had some success in this regard.
Managing the Headwinds
Goff provided updates on the factors that affected Volatus' revenue in Q1/23. They are:
1) Severe weather and wildfires in Alberta and British Columbia thwarting weekly inspections.
After obtaining approval, Volatus completed its first mission in July, helping wildfire suppression agencies in Western Canada.
"The company looks to add between US$1M and US$1.2M in inspection revenues in June and July with a greater impact likely to be seen with the Q3/23 results," Goff wrote.
2) Delays in executing oil and gas contracts due to fires and the slow start of the Canadian flying season.
Management indicated it has multiple recurring contracts between US$12M and US$15M in 2023 that, together with its robust pipeline, support the full-year revenue guidance. Echelon wants an update on the sales pipeline in the Q2/23 results. Plus, the Canadian drone company has several RFPs in its sales funnel that could increase Q4/23 revenues.
3) Delays in meeting equipment demand in Ukraine.
Thanks to its newly acquired product, the iRed Remote Sensing, Volatus expanded its presence in the United Kingdom.
4) Delays in building inventory.
Volatus has subsequently bolstered inventory to support greater product sales through Q2/23.
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Important Disclosures:
- As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Volatus Aerospace Corp.
- Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
- The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
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Disclosures for Echelon Capital Markets, Volatus Aerospace Corp., July 31, 2023
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ANALYST CERTIFICATION Company: Volatus Aerospace Corp.| VOL-TSX I, Rob Goff, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that I have not, am not, and will not receive, directly or indirectly, compensation in exchange for expressing the specific recommendations or views in this report.
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