You’ve probably heard of drones by now, and technically speaking, it’s a type of unmanned aerial vehicle (UAV), meaning a drone is an aircraft that flies by itself with no pilot or passengers.
The drone industry is rapidly changing, and investors have taken notice.
Drones have been used for years by the U.S. military, but are now just starting to be utilized commercially for consumers. E-commerce giant Amazon.com, Inc. (NASDAQ:AMZN) is testing drones to deliver packages, fast-casual restaurant company Chipotle Mexican Grill, Inc. (NYSE:CMG) wants to use drones to deliver its burritos, hobbyists can purchase GoPro Inc’s (NASDAQ:GPRO) Karma drone to achieve “Hollywood-caliber footage,” and that’s just the tip of the iceberg.
With this in mind, check out these three drone technology stocks that show promise in this burgeoning industry.
STMicroelectronics NV (ADR) (STM)
STMicroelectronics NV (ADR) (NYSE:STM) is a global semiconductor company that designs, develops, manufactures, and markets a broad range of semiconductor integrated circuits and discrete devices used in a wide variety of applications. Currently, Swiss-based STMicroelectronics is known for its chip research for 3-D printing and “Internet of Things” operations, but it also is exploring chips for drones.
STMicro is a #2 (Buy) on the Zacks Rank, with a VGM score of ‘A.’ Its earnings growth estimates, however, are insane. For the current quarter, STM expects year-over-year earnings growth of over 760%, with one upward revision compared to none lower.
STMicro is also in a strong industry, Semiconductor-General, which sits in the top 10% out of all industries ranked on the Zacks Industry Rank.
Lockheed Martin Corporation (LMT)
One of the biggest aerospace and defense giants today, Lockheed Martin Corporation (NYSE:LMT) is already responsible for many of the drones used by the U.S. military, and it continues to put its drone business front and center. Lockheed is also looking to begin manufacturing armed drones, which could be a big boon to its bottom line, especially if the Department of Defense continues to support the sale and use of them internationally.
Lockheed Martin currently holds a #2 (Buy) on the Zacks Rank, with a VGM score of ‘C.’ Its industry, Aerospace-Defense, rests in the top 30% of all industries ranked on the Zacks Industry Rank, and this could improve if President Trump’s defense budget gets approved.
Lockheed has posted an earnings beat for the past four consecutive quarters, and has an average surprise of 12.41%. For the current quarter, the company expects year-over-year earnings growth of 5.43%.
AeroVironment, Inc. (AVAV)
Despite its #3 (Hold) on the Zacks Rank, AeroVironment, Inc. (NASDAQ:AVAV) is probably the purest play option for those looking to invest in drones, apart from rival DJI, which is still a privately-held company. AeroVironment is a profitable, small-cap company that has both military and civilian clients, and its Raven drone model is the most widely-used small-scale drone in the world.
AVAV stock, however, does have a volatile history, but some of its earnings growth does look promising. For the current quarter, AeroVironment expects year-over-year earnings growth of about 330% and year-over-year sales growth of roughly 44%, and has an average earnings surprise of 73.68%.
If investors want a pure play drone option, AeroVironment is their best bet, but it’s risky a one, so stay cautious.
The Bottom Line on Drone Stocks
Like all new technologies, drones are continuously changing, and new investment opportunities will likely arise as the technology evolves. Don’t be surprised if other tech giants like Alphabet Inc (NASDAQ:GOOGL) beef up their drone offerings, following in Amazon’s footsteps. But if you’re looking to add drone stocks to your portfolio today, the list above is a good place to start.
For more information on the drone industry, check out a special episode of the Zacks Friday Finish Line, where Content Writer Ryan McQueeney and Editor Maddy Johnson were joined by Andrew Chanin, the CEO of PureFunds, to discuss the PureFunds Drone Economy Stretegy ETF IFLY, the first ETF to focus on the emerging commercial drone market.
Which Stocks are Zacks Experts Talking About?
Stocks in today’s headlines may be tempting buys, but how would you like a sneak peek at the stocks Zacks experts recommend? Starting today, for the next month, you can follow all of Zacks’ private buys and sells in real time.
You can track value and momentum stocks, ETFs, stocks under $10, options moves, insider trades, and stocks set to report positive earnings surprises (we’ve called them with 80%+ accuracy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report