According to a StartUs Insights Drone Industry Report, there are over 33,000 companies in the drone industry. And this is an industry with over 29,000 patents, which is a critical factor that investors look for when making an investment in emerging technology stocks.
However, drone technology is going mainstream. In addition to being used in defense applications, there are many commercial applications for drones. From being used as flying taxis to delivering food and packages, drones are being explored for convenience and cost efficiency.
And you have many options for investing in drone stocks. Conservative investors can invest in large-cap defense stocks. And more risk-tolerant investors may want to invest in the emerging eVTOL (electric vertical take-off and landing) sector. You can also invest in exchange-traded funds (ETFs) that focus on this important sector. This special presentation highlights seven drone stocks that can help you capitalize on the growth of this industry.
Quick Links
- Amazon.com
- Northrop Grumman
- Kratos Defense & Security Solutions
- AeroVironment
- Joby Aviation
- Archer Aviation
- SPDR S&P Aerospace & Defense ETF
#1 - Amazon.com (NASDAQ:AMZN)
At the time of this article, the port strike affecting much of the United States is on its third day. The issues on both sides are crystallizing why many companies, such as Amazon.com Inc. (NASDAQ: AMZN), are investing heavily in drone technology.
Specifically, Amazon has designed and built an autonomous electric drone system that delivers packages under five pounds in less than an hour from click to delivery through its Prime Air system.
This is currently only available in select test areas. However, Amazon has a Part 135 Air Carrier Certificate from the Federal Aviation Administration (FAA) and is working with that regulatory body to expand the number of flights it can run during the day as well as to operate during night hours. It’s also working to expand the operating flight range of its drones from 44 square miles to 174 square miles.
The Amazon analyst forecasts on MarketBeat have a consensus price target of $223.65 on AMZN stock, which would be a 22.8% upside from its price on October 3, 2024.
About Amazon.com
Amazon.com, Inc engages in the retail sale of consumer products, advertising, and subscriptions service through online and physical stores in North America and internationally. The company operates through three segments: North America, International, and Amazon Web Services (AWS). It also manufactures and sells electronic devices, including Kindle, Fire tablets, Fire TVs, Echo, Ring, Blink, and eero; and develops and produces media content.
Read More - Current Price
- $181.96
- Consensus Rating
- Buy
- Ratings Breakdown
- 41 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $223.65 (22.9% Upside)
#2 - Northrop Grumman (NYSE:NOC)
Northrop Grumman Corp. (NYSE: NOC) is one of the world’s largest defense contractors. It’s also on the leading edge of drone technology. The company’s drone solutions range in applications from unmanned aerial vehicles and underwater mine-hunting systems to defense readiness targets.
One of the best examples of the company’s drone solutions is the MQ-4C Triton, which the United States and Australia use to conduct reconnaissance operations over oceans and coastal areas. Another example is the RQ-4 Global Hawk, which is used by the U.S. Air Force and can operate continuously for over 30 hours. The company also uses its Blue Labs as an incubator of ideas for expanding the applications for this technology.
As of this writing, NOC stock is trading at $537.37, which puts it near the top of its 52-week range. Analysts have a consensus Hold on the stock. But on August 9, approximately two weeks after the company’s second quarter earnings report, Morgan Stanley raised its price target on NOC stock to $592, a bullish 20.4% gain.
About Northrop Grumman
Northrop Grumman Corporation operates as an aerospace and defense technology company in the United States, Asia/Pacific, Europe, and internationally. The company's Aeronautics Systems segment designs, develops, manufactures, integrates, and sustains aircraft systems. This segment also offers unmanned autonomous aircraft systems, including high-altitude long-endurance strategic ISR systems and vertical take-off and landing tactical ISR systems; and strategic long-range strike aircraft, tactical fighter and air dominance aircraft, and airborne battle management and command and control systems.
Read More - Current Price
- $537.43
- Consensus Rating
- Hold
- Ratings Breakdown
- 5 Buy Ratings, 9 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $523.20 (2.6% Downside)
#3 - Kratos Defense & Security Solutions (NASDAQ:KTOS)
Kratos Defense & Security Solutions Inc. (NASDAQ: KTOS) is a technology company that works with the defense, national security, and commercial markets. Part of the company’s portfolio is drone solutions.
The company is one of the leading providers of high-performance, jet-powered unmanned aerial systems, and has two full-scale families of tactical and target unmanned jet drones. One example is its XQ-58A Valkyrie drone, which flew alongside a pair of F-35s for the first time in April 2024.
KTOS is a mid-cap stock with a market cap of $3.79 billion. Through the first two quarters of 2024, the company has delivered an 18% year-over-year (YOY) revenue growth and eye-popping 73% YOY earnings growth.
Not surprisingly, the stock is up more than 70% in the past year and is trading near the top of its 52-week range. However, KTOS stock is still considered a Moderate Buy according to the analyst forecasts on MarketBeat.
About Kratos Defense & Security Solutions
Kratos Defense & Security Solutions, Inc operates as a technology company that addresses the defense, national security, and commercial markets. It operates through two segments, Kratos Government Solutions and Unmanned Systems. The company offers ground systems for satellites and space vehicles, including software for command and control, telemetry, and tracking and control; jet-powered unmanned aerial drone systems, hypersonic vehicles, and rocket systems; propulsion systems for drones, missiles, loitering munitions, supersonic systems, spacecraft, and launch systems; command, control, communication, computing, combat, intelligence surveillance and reconnaissance; and microwave electronic products for missile, radar, missile defense, space, and satellite; counter unmanned aircraft systems, directed energy, communication and other systems, and virtual and augmented reality training systems for the warfighter.
Read More - Current Price
- $25.18
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 6 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $25.00 (0.7% Downside)
#4 - AeroVironment (NASDAQ:AVAV)
AeroVironment Inc. (NASDAQ: AVAV) is another mid-cap stock on this list of drone stocks to watch. If you’re looking for a pure-play drone stock, AeroVironment is the one.
Since 2022, the company has been in the news as its Switchblade 300s one-way kamikaze drones have been used heavily in the Ukraine war. In fact, the company has delivered the vast majority of all uncrewed aircraft for the U.S. Department of Defense.
AeroVironment is also a savvy investment in the space economy. In 2021, the company’s Ingenuity (i.e., the Mars helicopter), developed through a partnership with NASA, was the first aircraft to achieve powered, controlled flight on another planet.
AVAV stock is up more than 61% in 2024 and that’s even after a nearly 10% drop in the stock price since the middle of June. Still, analysts have a consensus Buy rating on the stock with BTIG Research, reiterating a bullish $245 price target on the stock in mid-September.
About AeroVironment
AeroVironment, Inc designs, develops, produces, delivers, and supports a portfolio of robotic systems and related services for government agencies and businesses in the United States and internationally. It operates through Small Unmanned Aircraft Systems (SUAS), Tactical Missile System (TMS), Medium Unmanned Aircraft Systems (MUAS), and High Altitude Pseudo-Satellite Systems (HAPS) segments.
Read More - Current Price
- $201.11
- Consensus Rating
- Buy
- Ratings Breakdown
- 6 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $208.20 (3.5% Upside)
#5 - Joby Aviation (NYSE:JOBY)
If you’re considering an investment in drone stocks, you shouldn’t ignore the emerging electric vertical take-off and landing (eVTOL) space. And Joby Aviation Inc. (NYSE: JOBY) is one of the leaders in this space.
Colloquially, eVTOLs are referred to as flying cars or flying taxis. That’s because a key application for the technology will be transporting passengers from airports into cities for around the cost they would pay a ride-sharing company. There are other applications, including reaching remote areas, particularly in disaster relief situations.
However, this is a sector where safety and regulatory approval are paramount. But Joby Aviation is well on its way through meeting the FAA requirements and may be able to begin commercial flights in 2025. That’s a key reason why analysts maintain a bullish posture on JOBY stock. The stock has an $8.88 price target that offers 58% upside from the stock’s price on October 3, 2024.
About Joby Aviation
Joby Aviation, Inc, a vertically integrated air mobility company, engages in building an electric vertical takeoff and landing aircraft optimized to deliver air transportation as a service. The company intends to build an aerial ridesharing service, as well as developing an application-based platform that will enable consumers to book rides.
Read More - Current Price
- $5.61
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 3 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $8.88 (58.3% Upside)
#6 - Archer Aviation (NYSE:ACHR)
If Joby Aviation is the leader in the eVTOL space, Archer Aviation Inc. (NYSE: ACHR) may be considered the 1A choice for investors. In fact, many of the mutual funds and ETFs that invest in eVTOLs include both JOBY and ACHR stocks.
Archer Aviation’s lead product is its Midnight eVTOL. In August, it delivered its first Midnight aircraft to the U.S. Air Force, giving ACHR stock a brief lift and paving the way for commercial operations to begin.
That will be critical because, like Joby, the company is not yet profitable and is even in the pre-revenue stage. Nevertheless, ACHR stock is down 47% in 2024. That's nearly three times the stock price decline in JOBY stock. And while investors have been buying the latter in 2024, Archer remains under selling pressure. For now, it seems investors are casting their speculative vote on Joby, but Archer is still worth a close look for speculative investors.
About Archer Aviation
Archer Aviation Inc, together with its subsidiaries, engages in designs, develops, and operates electric vertical takeoff and landing aircraft for use in urban air mobility. The company was formerly known as Atlas Crest Investment Corp. and changed its name to Archer Aviation Inc The company is headquartered in San Jose, California.
- Current Price
- $2.95
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 4 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $9.00 (205.6% Upside)
#7 - SPDR S&P Aerospace & Defense ETF (NYSEARCA:XAR)
A great way to get diversified exposure to the drone sector is through an exchange-traded fund (ETF). These can give you access to some of the big names in the sector while helping to mitigate risk.
The SPDR S&P Aerospace & Defense ETF (NYSEARCA: XAR) isn’t a pure-play drone stock fund, but it does include several of the stocks in this presentation. It also gives you exposure to many of the biggest names in aerospace and defense, both attractive sectors.
The fund is a modified equal-weighted fund that tracks the S&P Aerospace & Defense Industry Index. As of October 3, 2024, the fund is up 17% in 2024, with much of those gains coming since April 2024.
As of this writing, the XAR ETF has 34 holdings, with several companies in the drone business among its 10 largest positions. The fund has $2.41 billion in assets under management (AUM) and has an attractively low expense ratio of 0.35%.
About SPDR S&P Aerospace & Defense ETF
The SPDR S&P Aerospace & Defense ETF (XAR) is an exchange-traded fund that mostly invests in industrials equity. The fund tracks an equal-weighted index of US aerospace & defense companies. XAR was launched on Sep 28, 2011 and is managed by State Street.
- Current Price
- $157.56
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 4 Buy Ratings, 9 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $167.43 (6.3% Upside)
As you can see, many companies are well on the way to taking drones from being a novel idea to something that we can't imagine how we ever lived without, like our smartphones. The applications are numerous and growing every day.
If you're still on the fence about investing in drone stocks, here's something to consider. Startup companies (most of which are not publicly traded) are receiving an average of $27.2 million per funding round. And this investment is coming from both the public and private sectors. Clearly, major institutions see a benefit in putting their capital to work in these companies.
MarketBeat helps you stay on top of the information that affects these companies. Even if you don't want to start investing in drone stocks today, you can add one or more of these stocks to a watchlist, and you'll receive alerts about news that affects those companies and their stocks.
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