AgEagle Aerial Systems (NYSEAMERICAN:UAVS) is garnering lots of attention recently, and rightly so. UAVS stock took a hit after earnings, but it looks as if it was a temporary setback.
The company is well-aligned to make serious inroads into the emerging unmanned aerial vehicles industry. Shares recently jumped into the $3-4 range. Shares remained flat around 50 cents throughout 2019. Thus, markets are keenly interested in AgEagle Aerial Systems’ strategy and underlying fundamentals.
Let’s look at the strategic direction that newly appointed CEO J. Michael Drozd outlined in his press release to shareholders back in early July. The letter clearly indicates the three industry sectors the company intends to pursue.
A Closer Look at UAVS Stock
Drozd noted that U.S.-based drone hardware and subcomponent design, manufacturing, assembling and testing will be a major area for the company. Firstly, the company is expanding its manufacturing capacity. This is being done in an effort to capitalize on an increasing desire to reshore supply chains in the wake of pandemic and political pressures.
He went on to say the company thought its American-based manufacturing plan was a significant key. Especially as businesses struggle to get what they need from China. Apparently, both supply chain and security problems continue to make potential drone customers wary of doing business there.
According to supplychaindive.com, 64% of 878 manufacturers surveyed said they are likely to bring manufacturing production and sourcing back to North America. Successful reshoring of American manufacturing post-pandemic will require a systemic effort.
That 64% of manufacturers are likely to do so is important. Without that concerted effort, manufacturers like AgEagle Aerial Systems can’t achieve such a goal, but it does look like a seismic shift is well underway. UAVS stock could very well capitalize on that shift.
AgEagle Aerial Systems addresses, in part, the drone delivery market opportunity. That fact has suggested to many that Amazon (NASDAQ:AMZN) may be interested in a partnership. However, investors would do well to pump the brakes in this case.
Although Wichita’s mayor did announce that Amazon is opening a distribution center in the city this fall, AgEagle Aerial Systems is simply not mentioned therein. Nor has any other confirmation come from either side.
Drones May Not Be What You Think
Investors should think about the type of drones that are used in delivery. Generally, these are quadrotor vehicles that act like helicopters. AG Drones, shown here, are essentially planes. They launch off of a metal rail that slingshots them into the sky.
This is not how drones will deliver packages. Nevertheless, it is entirely possible that the company is addressing that and may well be finding an appropriate solution.
But, any price spikes based upon buyer movement on Amazon speculation should be avoided. Investors should act if and when the company provides updates on actual delivery drone news. Not before. Delivery drones aside, investors have other reasons to be interested in UAVS shares.
Software for Hemp
UAVS stock can also appreciate based on its involvement in another emerging industry – hemp. HempOverview is the company’s analytics platform. Remember, the company made its mark in agriculture analytics with AgEagle. This is simply another iteration.
The company has contracted with Florida government and tribal agencies. Further, it is looking to expand that footprint outside of the state.
Look for sales of existing products and services in this strategic area to really drive the company. Remember, drone manufacturing is ramping up, and delivery drones are more of a direction than something tangible at this point.
The Bottom Line on UVAS Stock
I think this is a company to buy. For all intents and purposes, it is a young company in a great strategic position. It has iterated its agricultural drone products to address the emerging hemp market. Also, it is expanding its manufacturing footprint to perhaps address delivery drones, and certainly to address reshoring.
The company’s management team has a history of winning, and deep expertise in this field. I’m a big proponent of such qualitative assessments. Companies with good and intelligent leaders win. Based on financials, the company isn’t special. But importantly sales are rising.
Drone and assembly sales rose from $50,000 in the first half of 2019 to $375,000 in the same period 2020. Software platform sales doubled. I’d say buy now and keep an eye out for news in any of those three key strategic areas. Any of them could make UAVS stock appreciate quickly.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
