Aside from the pandemic and the unprecedented international response to it, 2020 may be known in the history books as the year of the pivot. Because of the disruptive nature of the novel coronavirus, it destroyed many businesses. However, a fortunate few, such as drone manufacturer AgEagle Aerial Systems (NYSEARCA:UAVS), have been able to adapt by adjusting their business model. But will this work out in the end for UAVS stock?
Initially, it’s difficult not to be at least somewhat skeptical. Even in the best of circumstances, pivots are challenging ventures, requiring organizations to get up to speed quickly on their new target industry. Further, I’m not sure how a pivot of desperation will improve probabilities. However, this is the new normal and anything can happen.
Among some of the sharp turns I’ve seen in the business world this year, AgEagle has credibility. For one, the company’s adjustment isn’t a wholesale one. Instead, it’s transitioning its focus from agricultural-based drone equipment and services to product delivery. Second, its drones are incredibly resilient, with some models able to fly against wind speeds up to 42 miles per hour.
As well, these drones integrate the latest in smart technologies and advanced optics, attributes that should be net positive for UAVS stock as the underlying company pivots to drone-based deliveries.
Most importantly, AgEagle has apparently inked a deal with a major e-commerce firm. As InvestorPlace contributor Chris Tyler mentioned, we don’t know if that means Amazon (NASDAQ:AMZN), Walmart (NYSE:WMT), Target (NYSE:TGT) or some other player.
But as far as UAVS stock and its trajectory is concerned, the critical takeaway is that AgEagle’s products and acumen carry substantial demand.
Compelling “Last Mile” for UAVS Stock
Before we go any further, let me just say this straight off the bat – UAVS stock is a speculative venture. Tyler rightly warned InvestorPlace readers that over the trailing 12-month period, AgEagle Aerial generated revenue of less than $650,000. Before the pandemic, this was a no-name company.
Even its headquarter location, Neodesha, Kansas, will raise eyebrows.
But if you can get over the speculative details clouding UAVS stock, this may turn out to be a surprising pick. Because what separates AgEagle from other crazy Robinhood-fueled gambles is the broader fundamentals. Essentially, AgEagle presents a viable solution to a common logistics issue.
Known as the last mile problem, it’s the final 10% of a shipped product’s journey that is the most expensive. And this financial cost stems from the last mile’s inefficiency. Unlike a long-haul cargo flight that suffers virtually no traffic and follows a single route, the final leg of the logistics chain features traffic congestion, stop-and-go driving and multiple drop-offs.
With AgEagle converting its agricultural service drones to delivery drones, it marries the efficiency of air travel with the last mile. Here, drones can skip over the suburban warzone and fly products directly to the end-customers. By doing this, AgEagle helps cut down on overhead associated with the last mile. As a result, companies can shift resources to more productive or efficient components of their business.
Another benefit to UAVS stock is that drone deliveries are relatively insulated from last mile competitors. For instance, companies can upgrade their software to incorporate more efficient order batching and routing. But the magnitude of such efficiencies are subject to whatever types of orders come in on a particular day.
With drones, you have predictability: whatever (small) order comes in, you can deliver it directly.
A Cannabis Play Too?
As I mentioned near the top, AgEagle originally plied its trade in agricultural services; specifically, the company used its drones to survey crops for the purpose of optimizing yields. Given that our modern society emphasizes techno-wizardry, this is the kind of subject that puts you into a coma.
That is, unless we’re talking about that kind of agriculture. In another mini-pivot, AgEagle “pioneered a proprietary, web- and aerial map-based technology solution designed” in part to facilitate oversight, compliance and enforcement of hemp cultivation. Therefore, even if the delivery business doesn’t work out, the cannabis side could keep the lights on and more.
If the U.S. is going to get out of its economic funk, it needs to open all viable economic channels. Basically, it can’t afford to be prudish on the burgeoning cannabidiol (CBD) industry. But for political reasons, the weed industry can’t be a free-for-all either. Theoretically, AgEagle helps bridge the gap between permissibility and legal oversight, potentially catalyzing UAVS stock.
Again, this is a speculative venture. But if you’re working with a “dumb money” fund, this may be the smartest gamble.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he did not hold a position in any of the aforementioned securities.