Is AgEagle Aerial Systems Stock A Buy?

AgEagle Aerial Systems Inc (NYSE:UAVS) is a Wichita, Kansas-based drone company focused on commercial applications. This means it creates drones capable of usage in automated agriculture and delivery.

It even attracted the attention of Amazon.com, Inc. (NASDAQ:AMZN), which was rumored to be a partner.

Those whispers never materialized, and that has some investors wondering – is AgEagle Aerial Systems stock a Buy?

Drones were pushed as the way of the future in the 2010s, but it’s still a relatively small market in the 2020s. However, the drone services industry is expected to grow to $63.6 billion by 2025. Drone shipments are expected to be a large growth driver.

And all roads in that conversation inevitably lead back to Amazon. If the company chooses AgEagle Aerial, it will likely be through an acquisition. The Seattle e-commerce giant is notorious for wanting full control over all its businesses and muscling even large vendors like FedEx (FDX), USPS, and UPS (UPS).

Will AgEagle Aerial Systems guide investors to big profits or crash portfolios into the ground?

Will Amazon Buy AgEagle Aerial Systems?

AgEagle Aerial Systems is a vertically integrated drone manufacturer and service provider. It’s working to become ISO9000 and AS9100 certified and is involved in both the hardware and software aspects.

This means it’s involved in all aspects of research, development, and testing, while also dealing with government regulation. Customers who can’t afford to buy their solutions can also lease drones (and pilots, if needed) for commercial usage.

Its biggest use case so far is in agriculture. This allows farmers to oversee their entire crops in as much detail as necessary, something that could often take all day. Of course, it also built buzz because of its delivery drones.

The idea of Amazon and other companies using delivery drones has been floated around for the past decade. But it’s not yet a reality and is unlikely to be one until at least the 5G wireless infrastructure has nationwide coverage.

And although AgEagle’s name was used in association with Amazon, no official partnership has been announced. This has investors wondering whether the stock is worth buying at these inflated prices.

Is AgEagle Aerial Systems Stock A Buy?

AgEagle Aerial Systems had a market capitalization of around $500 million in early 2021, and share prices skyrocketed as high as $17.68 before settling back under the $10 trading point. It’s not the first time that happened either.

The company has been in the commercial drone business for as long as there have been drones, and rumors abound of companies like Amazon (AMZN), Uber (UBER), Dominos, and others getting into drone delivery consistently come up.

Share prices essentially deflated in 2018 and haven’t been back up to cruising altitude until 2021, where its trading at turbulent prices in a large range. The 52-week low of $0.19 and high of $17.68 leaves a nearly 1000 percent trading range.

That could be a bit turbulent for investors, and it highlights the inherent risks of investing in the company or drone industry, for that matter.

Still, it has revenue – in the third quarter of 2020, it reported a record $750,000 in revenue, compared to $42,000 in the same period of 2019. This gave it $1.2 million in the first nine months of the year, driven by one customer’s orders.

And the company still reported a net loss of $579,000 for that quarter. It still ended the year with $24.7 million of cash on its balance sheet, thanks to fundraising efforts. In fact, in 2021 it seems to generate more cash from selling its own stock than from drones.

Risks of Buying AgEagle Aerial Systems Stock

AgEagle has impressive technology, but it needs more customers with more orders to justify its business to investors. To the company’s credit, it’s making these moves, with its HempOverview platform being picked up in the state of Iowa for its hemp crop oversight.

And it spent $23 million in January 2021 to buy MicaSense, a drone sensor company, from rival Parrot. This could give it important proprietary technology patents, although self-driving cars are using different navigation techniques.

Between lidar and AI-monitored video, drone navigation could be revolutionized in the air too. And the drone industry is highly competitive, leading some short sellers to call the company’s future prospects into question. It did rebound by responding in February, but it will take more than a press release to beat the competition.

AgEagle Aerial Systems Has Flying Competition

AgEagle isn’t the only drone company – Parrot and DJI are among the best-known names, but there are dozens of drone manufacturers.

And rivals in commercial and government drone usage include Aeromao, Altavian, and Event 38 unmanned systems. Each company has a smaller comparative footprint, but that’s not necessarily saying much.

What ultimately will make or break each company is corporate partnerships and adoption. If delivery picks up, it could be well placed, but until an Amazon delivery contract is signed, it’s up in the air.

Is AgEagle Aerial Systems Stock A Buy?

AgEagle Aerial Systems is a vertically integrated drone company focused on commercialized uses. It manufacturers any components and can engineer a custom solution for any use. So far, agriculture is its heaviest revenue concentration.

But drone delivery on its way. Amazon was reportedly in talks with AgEagle, but no purchase agreement was ever signed. If the e-commerce giant skips over AgEagle, it could be a virtual death sentence.

Of course, delivery isn’t the only use-case of drones. Construction and real estate, mining, exploration, and other companies use them. The government does too. If the company can pick up more lucrative long-term contracts, it could justify the investment. Until then, its options seem limited.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.