The U.S. Defense Logistics Agency (DLA) has doubled its order with drone firm Red Cat Holdings Inc. (RCAT:NASDAQ) subsidiary Teal Drones, Red Cat announced.
The agency is buying another 172 Teal 2 drones, plus spare parts and training, for another US$2.6 million, bringing the total contract to 344 drones for US$5.2 million.
"The Air Force needs to secure its airfields and bases 24/7, and the Teal 2 offers the highest-resolution night vision in its class," Red Cat Chief Executive Officer Jeff Thompson said. "We're honored that the Air Force has now doubled its order."
Both orders were requested by the U.S. Air Force Security Forces for defending bases and installations and were sourced by global operations support company Noble Supply & Logistics LLC.
Looking forward, ThinkEquity expects Red Cat's revenue and operating income to increase," ThinkEquity analyst Ashok Kumar wrote in March.
The Teal 2, designed as a leading unmanned aircraft system (UAS) for night operations, has been approved through the U.S. Department of Defense and is equipped with advanced high-resolution thermal imaging.
The Puerto Rican-based company has deployed 200 new high-speed drones on behalf of Ukraine and is involved in a US$90 million deal to provide drones for the U.S. Customs and Border Patrol (CBP).
The Catalyst: Ukraine Conflict Kickstarts Defense Spending
The Ukraine conflict has raised awareness of drones and increased defense spending in the West.
"Looking forward, ThinkEquity expects Red Cat's revenue and operating income to increase," ThinkEquity analyst Ashok Kumar wrote in March. "The investment bank estimates revenue will reach US$11.9 million in FY23 and then more than triple to US$37 million in FY24."
Technical Analyst Clive Maund said the stock "continues to have the prospect of winning some very big orders for its drones."
Technical Analyst Clive Maund said the stock "continues to have the prospect of winning some very big orders for its drones."
"It is thought very likely that it will do so before much longer, and this being so, the stock is believed to be at another favorable buy spot," he wrote on July 27.
Maund said he was staying long, and he "regarded it as a very good point to add positions."
"The company's Teal 2 drone appears to be a 'game changer,' as it has unsurpassed nighttime capabilities," he wrote.
Used by All Major Military Powers
The earliest unmanned aerial vehicles (UAVs) were small radio-controlled aircraft used as target training for fighters and anti-aircraft guns in World War II, Markets and Markets reported.
The global military drone market is projected to grow at a compound annual growth rate (CAGR) of 14.1% from US$14.14 billion this year to US$35.6 billion by 2030, according to Fortune Business Insights.
"Today, all major military powers and even some militia groups employ battlefield surveillance UAVs to extend the view of the ground and naval forces and to enhance the reach and accuracy of their supporting fire," the company wrote.
The global military drone market is projected to grow at a compound annual growth rate (CAGR) of 14.1% from US$14.14 billion this year to US$35.6 billion by 2030, according to Fortune Business Insights.
The Teal 2 is equipped with Teledyne FLIR's new Hadron 640R sensor, providing end-users with the highest resolution thermal imaging in a small form factor. Other technology partners in the Teal 2 project include Athena AI, Reveal Technology, and Tomahawk Robotics.
The system also offers multi-vehicle control and artificial intelligence capabilities, the company said.
Analyst: Strong Sales This Year
Red Cat has also signed on to provide two drones to the Bureau of Land Management for resource management and fire control coordination roles. That authorization includes another prospective 14 purchases in the future.
Red Cat's Skypersonic division uses the company's drones to examine difficult or dangerous-to-reach infrastructure. It should benefit from the US$1 trillion U.S. Federal Infrastructure Bill passed in 2021 that will create demand for drone inspection services across many civil improvement projects, including roads, bridges, and towers.
The company may also benefit from the United States' announcement of a US$300 million arms package for Ukraine, which includes air defense systems.
The building of the company's state-of-the-art facility in Salt Lake City, Utah, and an investment in raw materials for production "should support strong sales over 2023," analyst Kumar wrote.
"Red Cat's current inventory of chips is big enough to build thousands of drones, and the company has the capacity to manufacture this many in a month," Kumar wrote. "Now, with a developed and trained salesforce in place, Red Cat is continuing to build its sales pipeline."
Streetwise Ownership Overview*Red Cat "should benefit from new and repeat orders over calendar 2023," he noted.
Ownership and Share Structure
According to Red Cat, 37.27% of the stock is held by management and insiders. Reuters notes that CEO Thompson owns 22.13%. CEO of Fat Shark RC Vision Systems Gregory Ralph French has 8.67%. COO Allan Thomas Evans has 2.41%. Director Nicholas Liuzza has 1.76%. CFO Joseph Hernon has 0.47%, and CEO of Teal Drones George Matus has 0.58%.
Institutional investors have 9.01%. The Vanguard Group Inc. has 2.3%. Pelion Venture Partners has 1.62%. BlackRock Institutional Trust has 0.61%, and Geode Capital Management LLC has 0.49%.
The rest is in retail.
Red Cat Holdings has a market cap of US$54.92 million, with 55.54 million shares outstanding, and trades in a 52-week range of US$2.65 and US$0.7676.
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