In this article, we will take a look at the 8 Best Drone Stocks to Buy Now.
The term “drone” refers to any remotely piloted aircraft (RPA), which can vary in form and autonomy, either controlled by a human pilot or capable of fully autonomous flights. In 2005, the United States Department of Defense (DoD) and the Federal Aviation Administration (FAA) adopted the term “unmanned aircraft system” (UAS) to describe these aerial drones. This terminology was later adopted by other governmental agencies globally, highlighting the importance of considering various system components rather than focusing solely on the aircraft for regulatory development. The rapid evolution of drones began with the advancement of defense technologies, enabling the remote piloting of aircraft equipped with both weaponized and non-weaponized systems. These larger military drones, often weighing several kilograms, are crucial for deployment in environments too dangerous for human pilots. Today, smaller drones are employed by various government agencies for a range of operations, including precision agriculture mapping and surveillance.
The Russia-Ukraine war, which began in February 2022, has driven a significant increase in demand for drones, as both militaries employ them for various operations, including intelligence, surveillance, reconnaissance, and target acquisition support. The unprecedented scale of Unmanned aerial vehicles (UAVs) deployment caught both Ukrainian and Russian forces unprepared for such extensive use. However, both militaries have rapidly advanced their drone technology, frequently modernizing and adapting these systems directly on the front lines. In a statement this past year, Anton Gerashchenko, an adviser to Ukraine’s Minister of Internal Affairs, stated “This war is a war of drones; they are the super weapon here.” With advancements in artificial intelligence (AI) and increasing legislative support, the drone market seems poised for significant growth.
Another trend involves the development of specialized drones tailored for specific industries. These industry-specific drones are equipped with sensors, cameras, and software designed to meet the unique requirements of sectors such as agriculture, construction, and inspection. These ‘Consumer’ and ‘Recreational’ drones have become a common part of daily life, particularly among drone hobbyists. As of April of this year, over 780,000 drones were reportedly registered with the Federal Aviation Administration (FAA), with 375,226 classified as commercial and 400,858 as recreational.
What Does the Market Think About the Future of Drones?
The U.S. commercial drone market was valued at $5.85 billion in 2023 and is projected to reach approximately $14.11 billion by 2033, growing at a compound annual growth rate (CAGR) of 9.2% from 2024 to 2033. In 2023, the rotary blade segment held the largest market share at around 81%, while the hybrid segment is anticipated to experience the fastest growth, with a CAGR of over 11% during the forecast period.
On the other hand, a report by MarkNtel Advisors states that the global military drone market was valued at approximately $20.21 billion in 2023 and is projected to grow at a CAGR of about 12.21% from 2024 to 2030. This rapid growth is driven by the widespread adoption of Extended Visual Line of Sight (EVLOS) UAVs for long-range missions focused on data collection, battle management, and electronic warfare. A notable example of this technology came in the form of General Atomics’ testing of advanced datalink and avionics enhancements for the MQ-1C Gray Eagle Extended Range (GE-ER) drone back in 2022.
In light of the trends mentioned above, we decided to examine the best drone stocks to invest in.
Dmitry Kalinovsky/Shutterstock.com
Our Methodology
To compile the list of the best drone stocks to invest in, we first sifted through ETFs and online rankings to come up with a preliminary list. Next, we scanned Insider Monkey’s database of 920 hedge funds and selected the 8 drone stocks that were the most widely held by institutional investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple, our research has shown that we can outperform the market by imitating the top stock picks of best hedge funds. Our quarterly newsletter’s strategy picks 14 small and large-caps every quarter and it has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
8 Best Drone Stocks to Buy Now
8. AeroVironment, Inc. (NASDAQ:AVAV)
Number of Hedge Fund Holders: 20
AeroVironment, Inc. (NASDAQ:AVAV) 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.
On June 7, Jefferies raised its price target for AeroVironment, Inc. (NASDAQ:AVAV) to $230 from $195, while maintaining a Buy rating. This revision reflects confidence in the company’s near-term growth potential, particularly due to increased production of Loitering Munitions. The positive outlook is supported by recent insights gathered during a visit to AeroVironment, Inc. (NASDAQ:AVAV)’s Simi Valley Small Unmanned Aerial Systems (SUAS) production facility. Discussions with senior executives during the visit highlighted the company’s strategic initiatives and growth drivers, including its advantageous position to capitalize on the rising demand for autonomy in unmanned systems.
Additionally, AeroVironment, Inc. (NASDAQ:AVAV) has recently made significant advancements in various defense initiatives. Notably, the company’s Wildcat drone has been selected by the Defense Advanced Research Projects Agency (DARPA) for further development under its ANCILLARY program, which aims to enhance ship-based operations in challenging maritime environments.
At the end of the first quarter of 2024, 20 hedge funds tracked by Insider Monkey held stakes in AeroVironment, Inc. (NASDAQ: AVAV) worth $216.4 million, up from 15 hedge funds in the previous quarter with stakes valued at $199 million.
7. Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS)
Number of Hedge Fund Holders: 24
Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) is a diversified American defense stock involved in various technologies including hypersonic travel, engine propulsion, and satellite communications. Renowned for its advanced defense technology, the company is making notable strides in the drone industry, particularly within the military sector. Earlier this April, the company marked a key milestone by completing the initial phase of the U.S. Marine Corps’ Penetrating Affordable Autonomous Collaborative Killer – Portfolio (PAACK-P) program. This achievement was highlighted by a successful demonstration conducted by its Unmanned Systems Division for the XQ-58 Valkyrie drone. The demonstration followed a $22.9 million contract modification awarded in December of last year for further engineering development and flight test demonstrations.
In its first quarter, Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) nearly broke even, with revenues growing by 20% year-over-year. The defense technology contractor, focusing more on military drones, reported a net income of $1.3 million, equivalent to one cent per share, on revenue totaling $277.2 million for the quarter.
During the first week of June, RBC Capital raised its price target for Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) to $24.00 from the previous $23.00, while reiterating its Outperform rating on the stock. This adjustment comes after a meeting with Kratos’ CEO and CFO at the company’s San Diego headquarters, where RBC Capital analysts discussed the company’s first-quarter results for 2024 and the positive outlook for the remainder of the year. The discussions highlighted the air defense business as a key area experiencing significant growth momentum.
As of the end of the first quarter of 2024, Insider Monkey’s polling of 919 hedge funds showed that 24 of them were shareholders of the firm. The largest hedge fund investor in Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) is Catherine D. Wood’s ARK Investment Management, which holds a stake valued at $101.2 million.
6. Textron Inc. (NYSE:TXT)
Number of Hedge Fund Holders: 32
Textron Inc. (NYSE:TXT) is a well-known American industrial conglomerate headquartered in Providence, Rhode Island, distinguished for its advanced defense, government, and aerospace technologies and services. Notable subsidiaries include Textron Systems, Arctic Cat, Bell Textron, Textron Aviation, and Lycoming Engines, among others.
On May 10, Textron Systems announced that it was selected by the U.S. Army for the Future Tactical Uncrewed Aircraft System (FTUAS) Option 3 and Option 4 award. Under these options, Textron Systems will conduct a flight demonstration and a Modular Open Systems Approach (MOSA) demonstration, ultimately delivering an Aerosonde Mk. 4.8 Hybrid Quad (HQ) uncrewed aircraft system (UAS) to the U.S. Army for testing and evaluation. Meanwhile, the Textron’s other brand, Pipistrel, is preparing to fly its first prototype of the Nuuva V300 cargo drone.
Textron Inc. (NYSE:TXT) reported quarterly earnings of $0.70 per share, a significant increase from $0.35 per share reported a year ago. These figures are adjusted for non-recurring items. The quarterly report exceeded expectations with an earnings surprise of 48.94%. In the previous quarter, analysts anticipated earnings of $0.91 per share, but the company surpassed this with earnings of $1.06 per share, delivering a surprise of 16.48%.
Analysts have recently evaluated Textron Inc. (NYSE:TXT), setting an average 12-month price target of $101.88. The estimates vary widely, ranging from a low of $82.00 to a high of $111.00 This new average target signifies a 19.52% increase from the previous average, reflecting a generally bullish outlook on the stock.
As of the end of the this year’s first quarter, Insider Monkey’s data indicates that 32 out of the 919 hedge funds profiled were shareholders of Textron Inc. (NYSE: TXT). Mario Gabelli’s GAMCO Investors holds the largest hedge fund stake in the company with a $150.8 million investment.
5. Northrop Grumman Corporation (NYSE:NOC)
Number of Hedge Fund Holders: 39
Northrop Grumman Corporation (NYSE:NOC) is a leading multinational aerospace and defense technology company. With a workforce of 95,000 and an annual revenue exceeding $30 billion, it is one of the world’s top manufacturers of weaponry and military technology, as well as one of the best drone stocks available.
The company recently caught the aviation industry’s attention on account of its unpiloted stealth RQ-180 drone, which the company claims is “invisible to enemy radars, infrared sensors, and acoustic detectors,” and capable of flying at high altitudes and long ranges. According to a report from The Telegraph, the RQ-180 stealth drone could potentially add up to $100 billion to the $200 billion B-21 bomber contract that Northrop Grumman secured in 2015.
On the other hand, Northrop Grumman Corporation (NYSE:NOC) has received mixed analyst sentiments, with Jefferies recently lowering its price target to $500 from $530 while maintaining a Hold rating on the defense contractor’s shares. This adjustment follows a visit to Northrop’s facilities in Palmdale, California, where management provided insights into their operations. Jefferies highlighted several key observations from the tour, noting that Northrop Grumman’s Aeronautics segment is projected to achieve a 5% compound annual growth rate through 2026, based on their estimates.
According to Insider Monkey’s first-quarter database, 39 hedge funds were bullish on Northrop Grumman Corporation (NYSE: NOC), down from 45 in the previous quarter. A notable stakeholder is Donald Yacktman’s Yacktman Asset Management, which holds 387,219 shares valued at $185.3 million.
4. Honeywell International Inc. (NASDAQ:HON)
Number of Hedge Fund Holders: 52
Honeywell International Inc. (NASDAQ:HON) is an American publicly traded, multinational conglomerate headquartered in Charlotte, North Carolina. The company primarily operates in four business areas: aerospace, building automation, performance materials and technologies, and safety and productivity solutions.
The company has also collaborated with Aeroscout to provide the HGuide n580 inertial measurement unit for mapping and surveying equipment on its unmanned aerial vehicles. Additionally, Honeywell International Inc. (NASDAQ:HON)’s T-53 engine powers the K-MAX Unmanned Aircraft System, a unit of the K-MAX heavy-lift helicopter.
Honeywell International Inc. (NASDAQ:HON) reported robust year-over-year sales growth of 3% in the first quarter, a growth that was driven by an 18% organic increase in Aerospace Technologies and a 5% organic rise in Energy and Sustainability Solutions. Additionally, Honeywell Connected Enterprise offerings saw more than 20% sales growth across the portfolio, with cyber and buildings offerings leading the way. The defense contractor’s earnings per share for the first quarter were $2.23, up 8% year over year, while adjusted earnings per share rose to $2.25, marking a 9% year-over-year increase.
As of March 31 of this year, Honeywell International Inc. (NASDAQ: HON) had 52 hedge fund investors out of 919 funds tracked by the Insider Monkey database. Ric Dillion’s Diamond Hill Capital, with 1.13 million shares valued at $233.4 million, was one of the company’s largest shareholders for the quarter.
3. The Boeing Company (NYSE:BA)
Number of Hedge Fund Holders: 54
The Boeing Company (NYSE:BA), commonly known as Boeing, is an American multinational corporation that designs, manufactures, and sells airplanes, rotorcraft, rockets, satellites, and missiles globally. The firm also offers its own drone products, including the MQ-25 for the U.S. Navy and the ScanEagle, a long-endurance UAS. Recently, The Boeing Company (NYSE:BA) and the Ukrainian company Antonov signed a preliminary joint work agreement to collaborate on the production of unmanned systems to bolster Ukraine’s defense industry. The memorandum includes provisions for training, logistical support, and the maintenance of drones, including Boeing’s ScanEagle.
On June 14, Deutsche Bank reaffirmed its Buy rating on The Boeing Company (NYSE:BA), maintaining a price target of $225.00. This endorsement follows increased delivery activity, particularly for the 737 MAX model. Flight data indicates that the company has delivered 12 commercial aircraft so far in June, including 11 of the 737 MAX planes and one 787.
However, The Boeing Company (NYSE:BA) reported a significant drop in plane deliveries for May, with only 24 commercial jets delivered, a 52% decrease from the same month last year. Despite this decline, the company secured four new orders in May, all for 787-10 Dreamliners for Eva Air.
Furthermore, despite ongoing supply chain issues and fluctuations in top management, The Boeing Company (NYSE:BA) continues to secure contracts. Recently, the company reversed a decision to cut production of F/A-18 Super Hornet fighter jets, securing a deal to supply 17 of these jets to the U.S. Navy by 2027. Valued at $1.14 billion, the contract is expected to be completed by April 2027, with deliveries beginning in the winter of 2026.
During March 2024, 54 out of the 919 hedge funds profiled by Insider Monkey had bought and owned The Boeing Company (NYSE:BA)’s shares. Ken Fisher’s Fisher Asset Management was the biggest investor due to its $1 billion stake.
2. RTX Corporation (NYSE:RTX)
Number of Hedge Fund Holders: 62
RTX Corporation (NYSE: RTX), a firm specializing in aerospace and defense, provides systems and services to clients in the global commercial, military, and government sectors. The company operates through four primary segments: Collins Aerospace, Pratt & Whitney, Raytheon Intelligence & Space, and Raytheon Missiles & Defense. The defense contractors Coyote drone was a favored choice for the U.S. military as a near-term counter-UAS solution.
In Q1 2024, RTX Corporation (NYSE: RTX) reported sales of $19.3 billion, marking a 12% increase from Q1 2023. The company’s earnings growth was even more impressive, with a 32% year-over-year increase, reaching $1.28 per diluted share. Consequently, with profits rising faster than sales, RTX also achieved improved profit margins.
In addition, RTX Corporation (NYSE: RTX) has recently secured several significant contracts, including a $506 million agreement with NASA to develop the Landsat Next Instrument Suite (LandIS), which aims to enhance Earth observation capabilities. Additionally, the aerospace company managed to win a $677 million contract to continue producing AN/SPY-6(V) radars for the U.S. Navy. This marks the third option exercised from the March 2022 hardware, production, and sustainment contract, valued at up to $3 billion over five years. Under this contract, the U.S. Navy will receive seven additional radars, bringing the total number of radars under procurement to 38.
At the end of Q1 2024, 62 hedge funds tracked by Insider Monkey held stakes in RTX Corporation (NYSE:RTX), a slight increase from 61 in the previous quarter. These stakes have a total value of nearly $2.4 billion. With almost 9 million shares, Fisher Asset Management was the company’s leading stakeholder in Q1.
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 302
A prominent leader in technology and e-commerce, Amazon.com, Inc. (NASDAQ:AMZN) has been making substantial advancements in the drone industry. The company’s Prime Air program is shifting to smaller, quieter drone models with the six-rotor MK30. This faster, lighter, rain-resistant drone is expected to be available at the company’s three testing sites and in cities in Italy and the U.K. by late 2024. These drones will operate from the same inventory facilities as Amazon’s delivery trucks, offering customers a new delivery experience.
Amazon.com, Inc. (NASDAQ:AMZN) is solidifying its position as a leader in AI, driven by its AWS business, which achieved operating margins over 37% in the first quarter. AWS operating margins have consistently exceeded 30% for the past five quarters. Additionally, Amazon’s first-quarter revenue increased by 12.5% year-over-year, and its adjusted EPS more than tripled.
Moreover, JPMorgan recently reiterated its Overweight rating on Amazon.com, Inc. (NASDAQ:AMZN), with a price target of $240. This decision followed an in-depth analysis of the U.S. e-commerce landscape, including category penetration and Amazon’s market share. The research suggests that Amazon is on track to surpass Walmart as the largest U.S. retailer by 2024, with long-term e-commerce penetration potentially exceeding 40%.
As of March 31, Amazon.com, Inc. (NASDAQ:AMZN) had 302 hedge fund investors out of 919 funds tracked by Insider Monkey. The largest stakeholder was Ken Fisher’s Fisher Asset Management, with 42.5 million shares valued at $7.6 billion.
Vulcan Value Partners stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its first quarter 2024 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) is a dominant, world class company with powerful secular tailwinds in place including its ecommerce penetration, digital advertising growth, and the cloud transition. Amazon reported strong results during the quarter. Losses in the Core Retail business significantly narrowed. Amazon reduced its cost to serve on a per unit basis for the first time since 2018 as the company’s recent regionalization efforts continue to bear fruit.”
While we acknowledge the potential of drone stocks, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AMZN but that trades at less than 5 times its earnings, check out our report about the Cheapest AI Stock.
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