Prior to 2020, AgEagle Aerial Systems (NYSEAMERICAN:UAVS) was mostly known as an agricultural intelligence company. To be completely honest, UAVS stock wasn’t too exciting and the price action was underwhelming.
That was then, and this is now as AgEagle has rebranded itself as a company that can do more than provide farming intelligence solutions. Not only is the company expanding its operations, but it’s delving into a new market that could prove to be highly lucrative.
The main problem for shareholders is that the market has, to a certain extent, priced in these exciting developments for AgEagle. Is there sufficient reason, then, to believe that the bulls will continue to run the UAVS stock price up?
A Closer Look at UAVS Stock
Taking a view of the long-term price trajectory, suffice it to say that shareholders of UAVS stock haven’t fared well. A decade ago, UAVS was priced at more than $100 per share. Today, it’s technically considered a penny stock as it trades at less than $5.
On the other hand, we can paint a much brighter picture if we home in on UAVS’s performance this year so far. Believe it or not, UAVS stock only cost 47 cents at the beginning of 2020. Now it’s better than $3.
Much of that share-price increase was due to a particularly exciting announcement. It relates to a development that could transform not only the company but also the drone-manufacturing and package-delivery industries.
Granted, UAVS isn’t cheap on a short-term basis. Yet, it could be a bargain if the company continues to expand and innovate.
Chops Beyond the Crops
Take a glance at the AgEagle Aerial Systems drones page and you’ll see a cute little yellow drone flying over an expansive field of crops. On this page, AgEagle proudly touts its “high performance, ‘tractor tough’ drones for commercial farming operations, widely viewed as the most rugged, durable precision agriculture UAVs on the market today.”
That, in itself, hasn’t proven to be a massive growth industry. Or at least, judging by the share price over the years, the market doesn’t seem to see the potential in agricultural drone tech.
Clearly, AgEagle needed to make a change in order to establish its viability. This change came in the form of purchase orders to manufacture drones designed for package delivery.
According to the press release, the purchase orders represent “significant” new revenue, though the amount was not disclosed. Moreover, the purchase orders involve “the continued manufacturing and assembly of drones used for the testing and refining of the client’s commercial drone small package delivery vehicles, systems and operations currently in development.”
This event is somewhat shrouded in mystery as not only do we not know the dollar figure involved, but we also don’t know who the client(s) is/are.
Spreading Its Wings
It does seem evident, however, that AgEagle is serious about pivoting into this market. To that end, CEO Barrett Mooney stated that the aforementioned purchase orders are “expected to play a broader role in defining AgEagle’s long-term value proposition to a growing list of diverse industries.”
So, AgEagle seeks to flex its drone-making chops beyond the agricultural sphere. That’s not a terrible idea. Undoubtedly, the novel coronavirus pandemic has bolstered the package-delivery market substantially.
Yet, the company isn’t just expanding into a new sub-niche. It’s also expanding geographically.
Specifically, AgEagle chose Wichita, Kansas, as the place to expand its manufacturing operations. Understandably, Wichita Mayor Brandon Whipple is welcoming AgEagle’s arrival with open arms.
Whipple called Wichita the “Air Capital of the World,” and it is indeed an ideal locus for AgEagle’s operations. In particular, AgEagle CEO J. Michael Drozd cited “the region’s world class engineering and aeronautical talent pool, low-cost real estate advantages and high quality of life for our workforce.”
The Bottom Line
Interestingly, UAVS stock is short-term expensive but long-term cheap. The potential of package delivery via drones is definitely worth considering.
AgEagle is demonstrating that it’s serious about this emerging market. And, the company could someday be a household name someday because of it.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.