We came across a bullish thesis on Red Cat Holdings, Inc. (RCAT) on Substack by Industrial Tech Stock Analyst. In this article, we will summarize the bulls’ thesis on RCAT. Red Cat Holdings, Inc. (RCAT)’s share was trading at $5.28 as of April 24th. RCAT’s trailing P/E was 1.12 according to Yahoo Finance.
A high-tech robotic drone, showcasing the companys advancements in unmanned aerial systems.
Red Cat (RCAT) recently reported its 4Q24 earnings, offering limited updates as it transitions to a December fiscal year-end. However, management reaffirmed plans for an upcoming Investor Town Hall, which is expected to provide detailed visibility into SRR (Short Range Reconnaissance) milestones and funding timelines. Despite the brevity of the call, management’s confident tone suggests that 2025 SRR funding remains on track or may even exceed expectations. Red Cat is targeting $100M in SRR-related funding for the current military fiscal year ending in September, with three major contract milestones anticipated: the already signed Features contract, an imminent Limited Rate Production contract likely to coincide with the Town Hall, and a Full-Rate Production contract expected later this year. These developments could drive significant upside to the company’s full-year revenue guidance of $80M–$120M, which includes $25M–$65M from SRR-related Black Widow sales, $25M from non-SRR Black Widow, $25M from Edge 130 sales, and $5M from Fang FPV. The Town Hall may also tighten the current guidance range.
A key investor focus is international traction, with management highlighting growing global interest and potential new partnerships stemming from Red Cat’s presence at international defense events. As geopolitical tensions escalate and defense budgets expand, Red Cat is poised to benefit from a broader defense drone supercycle. Its U.S. base and inclusion in the DoD’s Blue sUAS program further strengthen its strategic positioning amid increasing legislative support for domestic drone manufacturing. While shares have recently dipped due to macro risk-off sentiment, none of the anticipated SRR revenue has yet been realized in financials. With transformative growth on the horizon and short-term margin compression expected during scaling, the current pullback presents a compelling entry point for investors anticipating a rerating as Red Cat executes on its defense-driven growth strategy.
Red Cat Holdings, Inc. (RCAT) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 9 hedge fund portfolios held RCAT at the end of the fourth quarter which was 7 in the previous quarter. While we acknowledge the risk and potential of RCAT as an investment, our conviction lies in the belief that some 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 RCAT 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 was originally published at Insider Monkey.