US Cos. Watch Closely As Drones Find More Battle Success

Drones were introduced to the battlefield and used extensively from early in the war in Ukraine, but efforts to use them to bring down larger prey like Russian helicopters had been mostly unsuccessful.

Now, according to a report by Defense News' Elisabeth Gosselin-Malo on Aug. 8, the Ukrainian military released footage showing one of its first-person view (FPV) drones hitting the tail rotor of a Russian Mi-28 helicopter, presumably crashing it.

"There were numerous attempts of Ukrainian FPVs trying to chase Russian helicopters before, but all such attacks were near misses," Sam Bendett, a research analyst at the U.S.-based Center for Naval Analyses, told the website. "It's difficult to pilot an FPV drone towards a military helicopter flying at high speeds."

Bendett said the overall impact of the hit was unknown, but the evolution of these drones and their uses needs to be watched by militaries globally.

"The sky over the [Ukraine] battlefield is now teeming with fast-flying FPVs hunting much larger prey, and assuming one can be piloted to the helicopter's vulnerable part — like its rear propeller — major damage can be done," he told Gosselin-Malo.

'The Products We Make'

Drone and drone component maker Unusual Machines Inc. (UMAC:NYSEAMERICAN) plans to be a part of the U.S. military's future in the sector. In a significant milestone for the company, the company recently announced that its Rotor Riot Brave F7 Flight Controller has been approved for the Blue UAS (unmanned aerial systems) Framework list for U.S. Defense Department purchases.

The Blue UAS Framework initiative by the Defense Innovation Unit (DIU) sets rigorous standards for cybersecurity, supply chain integrity, and operational requirements. This is done to ensure that certified UAS are trusted and secure, Unusual Machines noted. In order to be added to the Blue UAS Framework, a Department of Defense (DoD) sponsor needs to advocate for the product, and it has to represent a new capability.

"These are strong examples of the defense use case for the parts we make," Unusual Machines Chief Executive Officer Allan Evans said about the advances seen in Ukraine. "This has caused (and will continue to cause) the DoD and other government agencies to explore the integration of low-cost dual-use technologies — like the products we make — in their procurement and supply chains going forward."

Also this month, the Pentagon announced it has chosen systems for the second tranche of its Replicator initiative, which is meant to quickly get thousands of drones ready to counter China in any future conflict. The world's largest drone maker, DJI, or Da-Jiang Innovations, is Chinese and has cornered nearly 70% of the global drone market.

According to Defense News on August 8, Deputy Defense Secretary Kathleen Hicks unveiled the department's plans for Replicator last year. Since then, the Pentagon has selected its first tranche of capabilities, crafted acquisition strategies, and concepts of operation, trained units to use the initial systems, and secured nearly US$1 billion for fiscal years 2024 and 2025.

"Although we have lots more work to do, we are on track to meet Replicator's original goal of multiple thousands in multiple domains in 18 to 24 months — that is, by the end of August 2025," Hicks said, according to the website.

For the Price of an F-35 Fighter

Unusual Machines bought two consumer businesses from Red Cat Holdings Inc. (RCAT:NASDAQ) and is making drones and parts for Red Cat's systems. Red Cat's Teal 2 drone also has been certified as a Blue UAS by the DoD.

Technical Analyst Clive Maund noted, "This is believed to be a good point for investors to take positions in the stock" because of these catalysts.

Teal founder and Red Cat Chief Technology Officer George Matus told Forbes on August 7 that the entire defense drone industry could be transformed for "the price of a single F-35 fighter."

He said the key is volume production. "You don't necessarily need automation to reach high volume. What you need is a very easy-to-assemble product that's designed with no silly or dumb requirements," he told author David Hambling. "Automation should always be the last step to scaling volume."

And many will be needed. Bendett with the Center for Naval Analyses told Defense News that future FPVs used in combat will likely fly "in swarms and groups in order to overwhelm adversary defenses."

Matus said, "In many ways this is still day one for drones. With AI and autonomy, we really ain't seen nothing yet. Their near future capabilities will be outstanding."

A Good Point to Take Positions

After a stream of positive news, Unusual Machines' stock gained 33% from June until this week, Technical Analyst Clive Maund noted.*

In addition to being approved for the Blue UAS framework, the company was selected to provide drones and components for Red Cat's FANG™ line of FPV systems and launched the first NDAA-compliant Made in the U.S. flight controller for FPV drones.

Maund noted, "This is believed to be a good point for investors to take positions in the stock" because of these catalysts.

"The drone industry is very much a growth market and looks set to remain so for the rest of this decade, with the primary drivers being expanding military conflict, surveillance, and, increasingly, in the case of U.S.-based drone and drone component manufacturers such as Unusual Machines, what is called 'onshoring,' which means production returning from overseas places like China back to the homeland in large part due to security concerns," Maund wrote. "This is a process that is likely to be assisted and expedited by the government."

Maund said the stock has advanced towards the breakout point of a Head-and-Shoulders bottom.

"A breakout from this pattern will mark the start of a major new bull market in the stock," he wrote. "With volume building up this month and the now rising 50-day moving average coming into play beneath to support the price and momentum (MAD) increasingly positive, such a breakout looks imminent, so we stay long, and Unusual Machines continues to be rated a Strong Buy here."

Ownership and Share Structure

About 21.6% of the company is owned by management and insiders, UMAC said. The rest, 78.4%, is retail.

The company's market cap is US$15.4 million, according to Market Watch, with 9.33 million shares outstanding. It trades in a 52-week range of US$5.54 and US$0.98.

Important Disclosures:

1. Unusual Machines Inc. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000.
2. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Red Cat Holdings Inc and Unusual Machines Inc. 
3. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
4. 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. 

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* Disclosure for the quote from the Clive Maund article published on August 12, 2024

1. For the quoted article (published on August 12, 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.