We recently published a list of 7 Best Small-Cap Drone Stocks to Buy Now. In this article, we are going to take a look at where Red Cat Holdings, Inc. (NASDAQ:RCAT) stands against other best small-cap drone stocks to buy now.
Drones are the strategic weapon in modern warfare and we have experienced the use of high-end drone technology in the Iran-Israel and Russia-Ukraine wars. Drones or unmanned aerial vehicles (UAV) were also prominent in the 2020 conflict between Azerbaijan and Armenia.
READ ALSO: 8 Best Military Drone Stocks to Buy According to Analysts.
Drones are not only used in military applications but have become popular in amateur photography, videography, and logistics. Drone technologies continue to improve and emerge, for instance, the U.S. Department of Defense is currently investigating the development of uncrewed vehicles that use AI through its Replicator initiative. Vertical takeoff and landing (VTOL) autonomous aircraft are gaining popularity in the military. VTOL autonomous vehicles provide various features for military purposes including ISR to search and rescue.
According to a report from MarketsAndMarkets, the global drone industry was valued at $30.2 billion in 2024 and is projected to cross $48.5 billion in 2029, growing at a compound annual growth rate (CAGR) of 9.9%. Whereas, the UAV volume is expected to rise from 5.42 million units in 2024 to 7.51 million units in 2029.
Drone stocks remain an attractive investment option for investors as the industry continues to expand. However, not only publicly traded companies present investment opportunities, exchange-traded funds (ETFs) are also a notable option. Two major drone ETFs: SPDR S&P Aerospace & Defense ETF and iShares US Aerospace & Defense ETF returned over 38% and 27% in 2024, outperforming the broader market. Apart from established players in the drone sector, investors have a variety of emerging small-cap stocks to explore.
Our Methodology
We shifted through stocks that were involved in the drone business with a market capitalization between $200 million and $5 billion, as of January 23. We then selected the 7 best small-cap drone stocks based on hedge fund sentiment around each stock using Insider Monkey’s data for Q3 2024. The best small-cap drone stocks are ranked in ascending order of their hedge fund holdings.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Red Cat Holdings, Inc. (NASDAQ:RCAT)
Market Capitalization: $701.41 Million
No. of Hedge Fund Holders: 7
Red Cat Holdings, Inc. (NASDAQ:RCAT) is a drone technology company providing robotic hardware and software for military, government, and commercial use. The company is a great example of a growth story, specifically after it acquired Teal Drones in 2021. Teal Drones secured the U.S. Army’s SSR Tranche 2 contract, which would potentially bring $250 million over five years.
On January 23, Red Cat Holdings, Inc. (NASDAQ:RCAT) secured more orders from the Army National Guard and the U.S. Government Agency (OGA), with a total value of over $518,000. The military has ordered Edge 130 drones, which again signifies the growing demand for Red Cat’s drone technology. To further enhance their systems, the company is collaborating with Palantir to use its visual navigation and AI tool, Maven.
In Q2 FY2025, Red Cat Holdings, Inc. formed several partnerships and secured million-dollar contracts to expand its technology and solidify its position in the industry. The company has generated around $4.31 million in the first two quarters of FY25. The company expects the full-year revenue between $80 million and $120 million. RCAT is an attractive risk/reward stock with a relatively low market cap and significant upside potential.
Overall, RCAT ranks 6th on our list of best small-cap drone stocks to buy now. While we acknowledge the potential of RCAT to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than RCAT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.
