All Categories of Drones To See Swift Growth in US

The demand in the U.S. for all types of unmanned aerial vehicles (UAVs), or drones, is growing, and this is good news for domestic manufacturers in the industry.

North America dominates the global drone market, according to Skyquest, because of its high adoption rate of drone technology and leading drone manufacturers. Of the continent's countries, the U.S. is the largest market, "driven by the increasing demand for drone applications in the military, defense and commercial industries."

According to Statista, the U.S. "remains at the forefront of drone technology, with a robust market fueled by innovation and a diverse range of applications."

Player in Loitering Munitions Category

Propelled by use in wars around the world, a newer category of UAVs, suicide or kamikaze drones, has materialized and is gaining momentum in the States. These weapons can hover over a target until directed to fly into it; then, it hurtles into the target and explodes on impact.

"The emergence of global conflict has brought new players into the loitering munitions market, driving increases in demand and manufacturing. One is Russia," reported the authors of a February Defense and Security Monitor article. "The U.S. is likewise seeking to keep up with the trend."

A series of activity related to this type of weapon by the U.S. over the past two years continues to bear this out.

Its Department of State approved, in June, a new sale of two types of suicide drones totaling US$360 million (US$360M) to Taiwan, the U.S. Defense Security Cooperation Agency said in a news release. Included in the sale were 291 Altius 600M-V drones with warheads and 720 Switchblade drones, and related equipment. Taiwan is working to bolster its weapons cache without having to rely on China, even for drone parts, reported The Wall Street Journal.

With Iran becoming close to surpassing Russia as the No. 2 arms exporter in the world, the U.S. in the No. 1 spot, may look to accelerate sales of loitering munitions and other weapons to its allies, according to a February Atlantic Council blog post.

In May the U.S. Department of Defense secured about US$500M to carry out the first tranche of the US$1 billion (US$1B) minimum it is seeking to fund its Replicator initiative started last August. With the program, the Pentagon aims to deliver, by August 2025, all-domain autonomous systems (ADA2) to warfighters "at a scale of multiple thousands, across multiple warfighting domains," reported the Defense Innovation Unit.

To equip its military branches with loitering munitions, last July, the Pentagon announced Project LASSO to get these specific weapons to U.S. Army infantry units, noted the Defense and Security Monitor article. Similarly, The U.S. Marine Corps launched programs to get loitering weapons to squads in 2027.

In 2022, the U.S. committed to first providing 700-plus Switchblade units and later in the year, Phoenix Ghost loitering munitions to Ukraine.

Also, statistics indicate continued growth of the global loitering munitions market through at least 2032, at which time it is predicted to reach US$4.38B in value, according to Allied Market Research. This compares to the value in 2022 of US$1.55B and reflects a compound annual growth rate (CAGR) of 10.94%.

Growth Ahead For Other Types, Too

The market for other drones used in defense also is expanding. It is forecasted to reach US$5.6B in value by year-end 2032 from US$585.8M in 2023, according to Zion Market Research. The CAGR during this period is 28.4%.

"The principal factors propelling the expansion of the worldwide drone defense system market are the requirements for identification systems to detect unregulated airborne commercial drones and countermeasure systems to identify counterdrones," Zion noted.

The markets for drones used for business and for fun are also growing rapidly, according to Fact.MR. U.S. Federal Aviation Administration stats show that of the total drones registered in the States as of May 31, 2024, 392,468 were recreational, and 383,302 were commercial. The growth in recreational drones has been "driven by advancements in technology and changing consumer preferences," according to Statista. Growth in commercial drones is being propelled by their use in agriculture, surveillance, and construction.

Fact.MR noted that drone sales in the U.S. are projected to grow at a 16.9% CAGR to US$31.3B by year-end 2034 from US$6.6B in 2024.

With drone demand in all types of applications continuing to rise in the States, these two companies could benefit:

Red Cat Holdings Inc.

Red Cat Holdings Inc. (RCAT:NASDAQ)

Headquartered in Puerto Rico and with a manufacturing facility in Salt Lake City, Utah, Red Cat Holdings Inc. (RCAT:NASDAQ) develops and manufactures robotic hardware and software for use in aerial military and other operations. 

The company has all the necessary certifications for supplying its products to armed forces and other governmental agencies and has been awarded multiple military contracts to date.

Red Cat's lead product is the Teal, a small unmanned aircraft system (sUAS) originally designed to "Dominate the Night" with its ultra high-resolution thermal imaging, the company said, but has since been enhanced with additional capabilities.

"The product is portable by rucksack and can give soldiers in the field situational awareness in the form of intelligence, surveillance, and reconnaissance (ISR) as well as provide offensive capabilities in the form of loitering munitions delivery systems," reported Ladenburg Thalmann Analyst Glenn Mattson in a June 14 research report.

The company said these drones are an alternative to the conventional ISR/strike systems on the market, which are costly and cannot be retrieved.

Mattson initiated coverage on Red Cat in mid-June with a Buy rating and a price target, implying a 285% return for investors.

As for ownership of Red Cat, according to the company, 37.27% of the stock is held by management and insiders. Reuters notes that CEO Thompson owns 16.5%, and Director Nicholas Liuzza has 1.31%.

Institutional investors have 9.01%. The Vanguard Group Inc. has 1.75%, and Pelion Venture Partners has 1.21%, Reuters reported.

The rest is in retail. 

The company's market cap is US$79.48M. Its 52-week trading range is US$0.525−US$1.65. Unusual Machines Inc. (UMAC:NYSE)

Unusual Machines Inc.

Based in Florida, Unusual Machines Inc. (UMAC:NYSE) builds and sells drone components. 

After going public in February, it acquired two of Red Cat Holdings' subsidiaries, Rotor Riot, a source of recreational and hobbyist drones, and Fat Shark, a brand of first-person view (FPV) goggles.

"The company is already an established player in the consumer drone space with its e-commerce platform "Rotor Riot" and generates US$5M revenue a year with 20–30% year-on-year growth that is expected to continue," Technical Analyst Clive Maund wrote in a June 20 report.*

As a partner of Red Cat, Unusual Machines will provide the first drone and components for Red Cat's new FANG line of FPV systems.

Potential catalysts for UMAC include the upcoming season of governmental contract buying between the ends of July and September, highlighted Maund.

Also, the company could benefit from an acceleration of orders in anticipation of the American Security Drone Act taking effect in January 2025 and from the U.S. Countering CCP (Chinese Communist Party) Drones Act.

Maund rated Universal Machines' stock an Immediate Strong Buy.

In terms of ownership, about 12.54% of UMAC is owned by management and insiders, according to the company, and about 40% is held by strategic investor Red Cat Holdings Inc.

The rest is retail.

The company's market cap is US$12.97 million, according to Market Watch, with 9.33 million shares outstanding with 2.25 million free float shares.

It trades in a 52-week range of US$1.37 and US$1.47.

Important Disclosures:

1. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Unusual Machines and Red Cat Holdings Inc.
2. Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
3.  This article does not constitute investment advice and is not a solicitation for any 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. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company. 

For additional disclosures, please click here.

* Disclosure for the quote from the Clive Maund article published on June 20, 2024

1. For the quoted article (published on June 20, 2024), the Company has paid Street Smart, an affiliate of Streetwise Reports, US$1,500 in addition to the monthly consulting fee. 
2. Author Certification and Compensation: [Clive Maund of clivemaund.com] is being compensated as an independent contractor by Street Smart, an affiliate of Streetwise Reports, for writing the article quoted. Maund received his UK Technical Analysts’ Diploma in 1989.  The recommendations and opinions expressed in the article accurately reflect the personal, independent, and objective views of the author regarding any and all of the designated securities discussed. No part of the compensation received by the author was, is, or will be directly or indirectly related to the specific recommendations or views expressed

Clivemaund.com Disclosures

The quoted article represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maund's opinions are his own, and are not a recommendation or an offer to buy or sell securities. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications. Although a qualified and experienced stock market analyst, Clive Maund is not a Registered Securities Advisor. Therefore Mr. Maund's opinions on the market and stocks cannot be  only be construed as a recommendation or solicitation to buy and sell securities.