We recently compiled a list of the 8 Best Military Drone Stocks To Buy According to Analysts. In this article, we are going to take a look at where The Boeing Company (NYSE:BA) stands against the other military drone stocks. We also dive into unmanned aerial vehicle (UAV) industry trends.
Demand for military drones has surged over the last few years amid deadly escalations breaking out in different parts of the world. These unmanned aerial vehicles (UAV) were a prominent feature in the 2020 conflict between Azerbaijan and Armenia in the Nagorno-Karabakh region. They have also been clouding the skies in Kyiv, Kharkiv, and Borodyanka as the Russia-Ukraine war approaches the 1000-day mark, with no immediate end in sight.
READ ALSO: 10 Countries with the Most Military Drones in the World and 7 Most Undervalued Defense Stocks To Buy According To Analysts.
UAVs offer an unprecedented bird’ s-eye view of the battlefield, making it difficult for enemy targets to move and hide from the theatre of war. An increasing number of countries are actively deploying military drones within and outside their borders for intelligence, reconnaissance, surveillance, and target operations, in what is being seen as the arrival of a new threat in the aerial defense space.
According to a report, the drone industry was valued at $30.2 billion in 2024 and is projected to reach $48.5 billion in 2029, at a CAGR of 9.9% during this period. This has already been a healthy year for the drone market. For perspective, a major ETF issued by AdvisorShares has gained 15.46% YTD, outperforming the broader market by two percentage points. The market’s growth is fueled by the need for enhanced aerial security and the advancements in technologies being made in the UAV industry.
There is active work ongoing in building drone defense systems as well to guard countries against the threats posed by UAVs. In early October this year, the Department of Defense (DOD) awarded a $250 million contract to Anduril Industries to counter drone attacks against American forces. Under the contract, the US will receive 500 recoverable Roadrunner interceptors.
Roadrunners are reusable drones that can intercept incoming drones or land back on the ground if they are not engaged. Anduril did not name the DOD customer for security concerns, however, the company stated that the contract would serve the American military in ‘priority regions where U.S. forces face significant UAS threats’.
Anduril Industries also recently unveiled a new, autonomous drone called Bolt after the success of similar products in Ukraine. The vertical takeoff and landing (VTOL) autonomous vehicle will provide militaries with capabilities for a range of missions, from ISR to search and rescue. The drone also comes with a munition variant, called Bolt-M, to arm ground troops on the battlefield by making quick and precise strikes.
Compared to the use of costly and vulnerable fighter jets, loitering munitions after surveying the area through unmanned aerial vehicles has proven much more effective in the ongoing war between Russia and Ukraine, resulting in a surge of demand for military drones. With that said, let’s shift our focus now on the best military drone stocks to buy according to analysts.
Methodology
We sampled stocks from ETFs with military drone exposure and our own previous related articles on the subject. Then we narrowed down the list to the eight top stocks preferred by analysts, basing our rankings on their median share price upside potential and the number of analysts who had made projections about these companies, as of October 25, 2024.
We first ranked the stocks on each of these two metrics and followed it up by assigning the two metrics their respective weights, which were 40% for the median share price upside potential and 60% for the analyst count. This was followed by calculating the weighted ranking for each metric, and then aggregating the two to get an overall weighted ranking score. The 8 Best Military Drone Stocks To Buy According to Analysts are ranked in descending order of these weighted rankings.
Since only a few public companies are operating in the military-drone industry, we did not have a lot of choices for stocks, and one of these stocks had a negative median upside so we ranked it on a positive mean upside instead, which was based on the contribution of 5 analysts. This stock’s mean share price upside potential was assigned a weightage of 40% as well.
For added perspective, we also mentioned the sentiment of the hedge funds towards each stock from Insider Monkey’s database of 912 hedge funds for the second quarter of 2024.
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 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).
A commercial jetliner parked at an airport, reflecting the companies success in aviation.
The Boeing Company (NYSE:BA)
Median Share Price Upside Potential: 29.02%
Total Analysts: 22
Number of Hedge Fund Holders: 42
Weighted Ranking: 1
Boeing is a leading aerospace company that manufactures commercial airplanes, space systems, and defense equipment for customers in more than 150 countries. It also has an impressive product line of unmanned vehicles that operate in the air, across the sea, on the ground, and beyond the Earth’s atmosphere.
In February this year, The Boeing Company (NYSE:BA) delivered the first MQ-25 Stingray to the U.S. Navy for testing. This is the first carrier-based aircraft that does not require a pilot to be added to the Navy’s fleet. The drone will provide aerial refueling capabilities to extend the combat range of deployed fighter jets.
Another prominent UAV built by the company is the ScanEagle, which provides low-altitude surveillance and reconnaissance capabilities. Boeing is also the maker of the MQ-28 Ghost Bat, a stealth, multirole, unmanned combat aerial vehicle, which is primarily flown by the Royal Australian Air Force.
2024 has been a rough year for Boeing, with its shares losing over 40% of their value, year-to-date. It got off to the worst possible start in January, after a door plug of an Alaska Airlines 737 Max 9 flight fell off after takeoff. Since the incident, there has been a slowdown in the production of airplanes, with an increased focus on safety. It is also in the midst of a labor crisis, with around 33,000 workers going on a strike since September 13, demanding higher wages, job security, and a restoration of their pension.
On October 23, the company announced its financial results for the third quarter of 2024. Revenue was recorded at $17.8 billion, down 1% year-over-year, due to the impact of lower commercial wide-body deliveries and the IAM strike. This resulted in a quarterly loss of over $6 billion, translating to a loss per share of $10.44, which was worse than forecasts of a $10.35 loss per share.
Despite the challenges, most analysts believe that Boeing is too big a company to fail, and with a backlog of orders worth $500 billion and international travel growing every year, it is bound to recover once the headwinds are over. It booked $8 billion in orders during the quarter, which included a $2.6 billion award from the U.S. Air Force for two E-7A Wedgetail aircraft. The aerospace giant is also working on another key defense project, the NGAD program, which aims to develop a sixth-generation fighter jet to replace the F-22 Raptor by 2030.
Wall Street analysts have consensus on the stock’s Buy rating and expect a median upside potential of over 29% in its share price, which makes The Boeing Company (NYSE:BA) the best military drone stock to buy according to analysts.
Overall BA ranks 1st on our list of the best military drone stocks to buy according to analysts. While we acknowledge the potential of BA as an investment, 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 BA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.