Red Cat Holdings Inc. (RCAT:NASDAQ) will equip its current and future drones with artificial intelligence (AI)-driven voice control capability through a new partnership with Primordial Labs, a developer of AI systems requiring collaboration between human and machine, noted a news release.
To start, Red Cat will incorporate Primordial Labs' Anura interface into its Teal 2 drones, used by military, public safety and government entities for intelligence, surveillance and reconnaissance. This will allow operators to control the actions of the drones individually or as a cluster with voice commands.
"The flexibility provided by voice control, combined with the existing features in our offering, will continue to push Teal's drones into a leadership position," Red Cat's Chief Technology Officer George Matus said in the release. Existing features include forward-looking infrared imaging (FLIR), multi-vehicle control support and a fully modular design.
Red Cat's joining forces with Primordial Labs is the latest in a series of partnerships it has formed around technology. Red Cat has also joined forces with Tomahawk Robotics, Athena AI, Teledyne FLIR, Reveal Technology, Immervision and Doodle Labs.
Growth in Revenue, Contracts
Headquartered in Puerto Rico and with a manufacturing facility in Salt Lake City, Utah, Red Cat Holdings develops and manufactures robotic hardware and software for use in aerial military and other operations. It has all the necessary certifications for supplying its products to military and other governmental agencies and has been awarded multiple military contracts to date.
Red Cat is on a growth trajectory, having just posted record revenue for Q3 of fiscal year 2024 (FY24), ended Jan. 31, 2024, Think Equity Analyst Dr. Ashok Kumar relayed in a Feb. 20 research note. Preliminarily reported revenue for Q3 is $5.8 million ($5M), reflecting a 49% quarter over quarter increase. Q3 marks the third consecutive quarter of sequential revenue growth for Red Cat.
Currently, Red Cat has its largest ever order backlog, valued at about $5.1M, the company said, and is among the finalists for several military contracts to be awarded over the next 12 months.
New Law to Boost Drone Market
The drone markets in both the U.S. alone and worldwide are projected to continue growing in military and commercial sectors, data show.
According to Statista, the U.S. drone market is expected to expand at a compound annual rate of 0.36% between 2024 and 2028. Currently, the market is valued at $1.4 billion ($1.4B). The U.S. stands out because, as Statista notes, it "is leading the worldwide market for drones with its advanced technology and extensive use in various industries."
Further, the U.S.'s total addressable drone market should see a big boost starting in December 2025 when a newly enacted law goes into effect. The American Security Drone Act (ASDA), reported UAV Coach, bans the U.S. government from using federal funds to purchase drones made, or containing certain components made, in China, Russia, Iran and North Korea. The ASDA also prohibits the operation of drones manufactured in these countries.
Forecasted growth for the global drone market, Statista indicates, is even greater than that for the U.S. Estimates put the market expanding at annual compound rate of 2.26% between 2024 and 2028. Its current value is $4.3B.
The Catalyst: Improved Financials
This year, Red Cat aims to continue increasing revenue, improving its profit margin and, where possible, minimizing expenses.
For revenue in Q4 FY24, to end April 30, 2024, the drone technology firm has guided to $7M, 20% higher than in Q3 FY24. If achieved, this would mean Red Cat generated $28M in the nine months its Teal 2 drone has been on the market.
ThinkEquity expects Red Cat's revenue to grow to $35M from $9.9M between FY23 and FY25, Kumar reported.
The investment bank has a Buy rating and a target price on the drone company reflecting about a 590% return for investors.
Technical Analyst Clive Maund reviewed Red Cat's stock in a July 2023 note and based on its three- and 14-month charts, concluded it was a good time to buy. He indicated he would stay long in the company.
Ownership and Share Structure
According to Reuters, insiders own a large portion of Red Cat Holdings. Eight individuals hold 27.41%, or 18.51 million (18.51M), shares of it. Those with the largest stake, from most to least, are Chief Executive Officer Jeffrey Thompson with 16.52% or 12.25M shares, Gregory French with 6.49% or 4.82M shares and Allan Evans with 1.82% or 1.35M shares.
Institutions hold a smaller stake of Red Cat than insiders do: 20%, or 13.07M shares. The Top 3 institutional investors are AWM Investment Co. Inc. with 6.74% or 5M shares, AIGH Capital Management LLC with 5.09% or 3.78M shares and The Vanguard Group Inc. with 1.75% or 1.3M shares.
Retail investors own the remaining 52.59%.
Red Cat Holdings has 74.16M shares outstanding and 49.16M free-float traded shares.
Its market cap is $54.88M and its 52-week trading range is $0.525−1.47 per share.
| Want to be the first to know about interesting Technology investment ideas? Sign up to receive the FREE Streetwise Reports' newsletter. | Subscribe |
