These are the best drone stocks to consider now.
It wasn’t so long ago that, outside of the context of bumblebees, drone stocks didn’t exist. But the last decade-plus has seen the rapid rise of drone technology. Also known as unmanned aerial vehicles, or UAVs, drones are used in all sorts of industries, from the military and law enforcement to areas like film, insurance and package delivery, with hobbyists and the emerging field of drone racing not to be forgotten. Investors looking to buy into a piece of the action should keep an eye on the following stocks, most of which are pure-play drone stocks. That said, because the industry is still nascent, there are a few larger companies with diversified operations that also happen to make drones. Here are the top drone stocks to watch in 2022, from smallest to largest.
Parrot SA (ticker: PAOTF)
First up and smallest on the list is the $120 million French drone company Parrot SA. Although once focused on the avid and expanding hobbyist market, Parrot pivoted in recent years to target the far-faster-growing professional market. This shows up in Parrot’s financials for the first half of 2022, during which its newer business lines saw revenue soar 72%. Total company revenue advanced 26%, a much lower but still impressive number reflecting the intentional winding down of its consumer business. Parrot drones are seeing good adoption in key target markets that include the inspection, surveillance and mapping industries. Its small size and foreign base mean Parrot isn’t traded on major stock exchanges in the U.S.; its stock is instead traded on an over-the-counter basis, as well as on the French stock exchange Euronext Paris.
EHang Holdings Ltd. (EH)
Next up is China’s EHang, which is one of the flashiest drone stocks on the market. That’s because EHang is one of the few companies pioneering technology that could be considered the closest thing to a flying car. Its EHang 216 is a vertical takeoff and landing, or VTOL, aircraft that functions as a high-powered electrical, autonomous passenger drone. Orders for the aircraft are already being filled in China. Envisioned as an eco-friendly way for small numbers of people to navigate dense urban cities, the EHang 216 has a max payload of 485 pounds, a max speed of more than 80 miles per hour and a range of 19 miles or so at capacity. The roughly $300 million EHang trades for about 55 times sales, a hefty multiple, but one potentially justified by its eye-popping growth rate: Analysts expect revenue growth of 125% in 2022 and more than 400% growth in 2023.
Kratos Defense & Security Solutions Inc. (KTOS)
Kratos is a $1.5 billion aerospace and defense company based in San Diego. The first of the companies on this list with a more healthy business mix outside of drones, Kratos has end customers including large government agencies like the Department of Defense, intelligence agencies and international powers. While the company is in a range of businesses including satellite communications, cybersecurity, jet systems and even microwave products, a meaningful chunk of its business is also from drone technology. Kratos’ unmanned-systems segment hauled in $56.4 million last quarter, accounting for 25.2% of overall revenue. KTOS is a solid, consistent grower, and analysts see revenue growth of 12% in 2022 and 11% in 2023.
AeroVironment Inc. (AVAV)
Another player in the aerospace and defense industry, AeroVironment is a $2.3 billion company based in Arlington, Virginia, just outside the nation’s capital, where all those juicy defense contracts are inked. AVAV designs, manufactures and sells unmanned aircraft systems that it sells largely to the U.S. and international governments. So, as with KTOS, AeroVironment’s business is a remarkably consistent and steady grower. Between fiscal 2018 and fiscal 2022, AVAV’s revenue advanced from $268 million to more than $445 million, never growing by less than 7.5% in a year. Drones are an important part of military operations, and unless defense spending gets dramatically dialed down, don’t count on AVAV’s business faltering any time soon.
Joby Aviation Inc. (JOBY)
Next up on the list of drone stocks is Joby Aviation, a $3.2 billion company based in Santa Cruz, California. Like EHang, Joby has eschewed the military and hobbyist market in favor of the holy grail in the consumer market: the passenger drone. Joby sees its electric-powered vehicles one day forming the first fleet of North American aircraft to deliver air transport as a service — Joby more or less wants to be Uber Technologies Inc. (UBER) for the skies. The company is extremely well capitalized, with $1.2 billion in cash on its books and backing from the likes of LinkedIn co-founder Reid Hoffman. With more than 10 years of development behind it, Joby looks like it could be the real deal. Its electric VTOL aircraft, designed for one pilot and four passengers, has more than 1,000 successful test flights under its belt. The vehicle has a maximum speed of 200 miles per hour and a range of 150 miles.
Northrop Grumman Corp. (NOC)
Moving far away from pure-play drone stocks, next we have major players in the military-industrial complex including Northrop Grumman. A mainstay in the defense industry, the $76 billion company makes a wide range of weapons systems, missile defense systems, radar systems, navigation technology and even intercontinental ballistic missile tech. Needless to say, Northrop Grumman makes drones as well, and they aren’t for hobbyists — nor do they make up a massive part of NOC’s steadily growing business. Either way, investors looking for a modest exposure to the military drone industry without all the risk that pure-play drone stocks entail can surely consider the Falls Church, Virginia-based Northrop, which was founded in 1939.
Lockheed Martin Corp. (LMT)
Last up is another household name and mega defense contractor: Lockheed Martin. The $110 billion Lockheed operates through four segments: aeronautics, missiles and fire control, rotary and mission systems, and space. Aeronautics is its largest division, hauling in $5.86 billion, or 38% of overall revenue, last quarter. While combat aircraft like the F-35 are the largest component of aeronautics, unmanned air vehicles like drones make up the other chunk of that segment. There are other large-cap, well-diversified drone companies in Lockheed’s stratosphere — Boeing Co. (BA) and Honeywell International Inc. (HON) come to mind — but LMT is on extremely strong footing, hauling in more than $300 million in profits and returning $1.1 billion to shareholders last quarter alone.
7 drone stocks to watch:
— Parrot SA (PAOTF)
— EHang Holdings Ltd. (EH)
— Kratos Defense & Security Solutions Inc. (KTOS)
— AeroVironment Inc. (AVAV)
— Joby Aviation Inc. (JOBY)
— Northrop Grumman Corp. (NOC)
— Lockheed Martin Corp. (LMT)
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Update 09/22/22: This story was previously published at an earlier date and has been updated with new information.