When discussing the technology of the future—the tech that’s bound to disrupt a given market—we so often think of software. We’ve grown accustomed to thinking of programs and algorithms as the next great way to maximize profits. But by keeping our eyes glued to screens, we miss out on the innovations in hardware that’re soaring over our heads. I’m talking about the lucrative world of drone stocks.
For years, drones have filled skylines and headlines around the world. The history of drones—traditionally called unmanned aerial vehicles (UAV)—stretches back more than a hundred years, to technology originally developed by Nikola Tesla.
The Growing Market for Unmanned Aerial Vehicles
While drones aren’t exactly a new innovation, the advent of drone-developing corporate entities over the past few years has seriously pushed the envelop for the UAV industry. Analysts predict that, by 2025, drone stocks around the world will collectively be worth $129.23 billion USD. And that’s at a remarkable CAGR of 56.5%!
That growth is being driven by newfound applications for the technology. While much of the public only think of drones for their military or recreational purposes, governments and private businesses are beginning to appreciate how UAV solutions can serve a wide variety of industries.
From agriculture, real estate, and oil & gas to first responder and civil defense services, drones make work safer and more affordable for dozens of important industries.
The Great Drone Disruption
More than 50% year-over-year growth over the next half-decade is reason enough to consider taking a closer look at the UAV industry. But there’s another factor making now a better time than ever to watch drone stocks.
You see, for nearly a decade, the drone market has been dominated by one company: DJI Technology Co. A privately held Chinese company, DJI controlled 74% of the industry as recently as last year.
But in August 2019, the US Army—a major purchaser of UAVs—banned service members from using DJI drones, citing “increased awareness of cyber vulnerabilities.” Then, just before Halloween, the Department of Interior grounded more than 800 of its DJI drones for the same reason.
Starting immediately, both government and private bodies in the US will begin looking for UAV solutions from local drone manufacturers. Because of this, drone stocks have a better chance to capture that $129 billion market than ever before.
Why Pure-Play Drone Stocks are the Best Buy
This drone market disruption hasn’t gone unnoticed by major corporations.
However, while the UAV market won’t significantly move the needle for highly diversified companies worth hundreds of millions of dollars—like Alphabet Inc. (NASDAQ:GOOGL), Raytheon (NYSE:RTN), and Amazon.com, Inc. (NASDAQ:AMZN)—it will make all the difference for small- and micro-cap drone stocks.
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What’s more, most companies that seriously want to enter the UAV market will look to acquire pure-play drone companies. This will save them a lot of time, money, and effort compared to developing their own drone solutions.
With all this in mind, here are a handful of pure-play drone stocks investors can consider watching next year.
Pure-Play Drone Stocks: AeroVironment
AeroVironment Inc. (NASDAQ:AVAV) is now the Pentagon’s top provider of drones. Its flagship Raven drone is also “the most widely used unmanned aircraft system in the world today.”
With a market cap near $1.5 billion, AVAV is significantly smaller than other drone providers to the military, like Raytheon or Boeing Co (NYSE:BA). But unlike those defense giants, the company is entirely devoted to UAV tech. Therefore, it controls the supply of small drones, which are more useful to the military for reconnaissance and emergency supply missions.
Over the next five years, the US military is projected to increase drone investments by about 15% annually. This places AeroVironment just where it needs to be to potentially profit.
Pure-Play Drone Stocks: Drone Delivery Canada
After skyrocketing more than 200% in value at the end of 2017, shares of Drone Delivery Canada Corp. (DDC) (TSXV:FLT) (OTCQX:TAKOF) have steadily declined for two years. But in the month, the Toronto-based company has made some big moves towards profitability.
Most notably, DDC recently announced it is establishing the world’s first airport drone delivery hub at Edmonton International Airport. The deal was made through an agreement with Air Canada Cargo to act as its sales and marketing agent.
This makes Drone Delivery Canada the leading provider of UAV solutions to the Canadian delivery industry. With FLT stock lower than it’s been in years, investors may want to watch this drone stock.
Pure-Play Drone Stocks: Draganfly
Draganfly Inc. (CSE:DFLY) is a particularly intriguing play because, despite being an incredibly recent IPO, it’s actually the oldest operating drone company in the world.
For more than twenty years, DFLY has provided drone solutions for public safety and first responders working with police forces. It’s now taking full advantage of the ban on Chinese drones to address the US government’s need for UAV tech.
On Monday, Draganfly officially updated its product line. The Tango2+ now has improved efficiency and flight duration, which expands its commercial applications. As the company is known for addressing the needs for many different industries, these expanded capabilities could indicate serious returns for the company in the coming months.
Featured image: DepositPhotos © conceptw
