AgEagle Aerial System (NYSE:UAVS) may just be the next big thing in e-commerce logistics. At least, the owners of UAVS stock certainly seem to think so, as AgEagle’s shares have soared from mere pennies earlier this year to $2.90 each now.
There are several reasons for the surge. For one, AgEagle Aerial has been on the move, securing facilities and preparing to enlarge its operations. The first signs of that strategy paying off came in Q1, when its revenue more than doubled year-over-year, albeit off a small base.
The company suffered a setback in Q2, however, as it generated nearly zero revenues. It also didn’t clarify any of the rumors around a potential big strategic partnership. Still, there are reasons to give the drone maker the benefit of the doubt for now.
The Pandemic Hurt AgEagle
I covered the AgEagle story in great detail earlier this summer, and those interested in a comprehensive look at the company’s history and development should read that column. At the time, I concluded that AgEagle had a potentially interesting story, but that it wasn’t quite “ready for primetime” just yet.
AgEagle’s top-line Q2 numbers weren’t compelling, as the company reported just $16,000 of revenues.
But AgEagle should be given a pass due to the pandemic. The company said that it was unable to procure needed parts for the manufacture of its drones. As a result, the company says that $770,000 of the revenue that it expected to realize in Q2 will now be pushed into Q3.
As long as these sales do in fact occur in the coming months, AgEagle. will still have made progress The company hasn’t topped $500,000 of sales in a single quarter before, so $800,000 or $1 million of revenue would be quite a jump.
Still a Long Way to Go
While the company is potentially set to report a record quarter this fall, don’t get too excited just yet. Even if its revenue comes in closer to a million dollars, its business is still tiny. Usually, publicly traded companies don’generate such paltry revenues and remain in business for long. Executive salaries, listing fees, audits, and other expenses cost too much money for publicly traded firms to stay afloat for long with such low revenue.
But in light of the company’s recent $10 million capital raise, its burn rate is low enough to let it keep carrying out its growth plan for several years. As of the end of Q2, it had around $25 million of cash on hand and no long-term debt. As a result, it should stay around for awhile.
The Verdict on UAVS Stock
AgEagle’s Q2 earnings report was a mixed bag. It wasn’t great that the company generated so little revenue. But it had a legitimate reason for that shortfall.
Now all eyes will be on Q3, though. Will AgEagle’s revenues end up meeting its forecast? And, arguably even more importantly, will AgEagle announce a partnership deal with Amazon (NASDAQ:AMZN) or another major e-commerce company? Rumors and speculation continue to circulate about AgEagle providing its drones to such a company. Needless to say, a signed contract with a major player would totally change AgEagle’s outlook.
Until then, though, UAVS stock is a name to keep on your watchlist. AgEagle could have a big breakthrough. However, nothing that transpired over the past quarter would indicate that the shares have reached a turning point yet.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article.