Drone Stocks – To Invest Or Not To Invest?
Drones – The new coming of age technology
Drones, technically known as Unmanned Aerial Vehicles (UAVs) are one of the integral technologies of our future world. Their impeccable range of features set them aside for a wide variety of uses. These compact tools were originally designed for the military and aerospace industries with their capacity to fit in a box, reach the remote corners of the world by means of flying while capturing the unknown through cameras. Due to the range of autopilot autonomy provided by drones they are now used for various purposes such as food delivery, surveillance, emergency rescue, wildlife and historic conservation and last but not the least photography. Drone stocks are on the rise as the military invests in new drone platforms and the FAA establishes rules for commercial drones, opening up the possibility of drone delivery services. As this high-flying technology continues to draw the attention of investors and traders, lets take a thorough look at their status in the stock market.
Should you consider drone stocks or not?
When investment mavens drone on, it’s easy to tune them out. But when investment mavens talk drones, there’s every reason to listen. Quadcopters, ocean robots, and the like represent a wave of high-tech you could well call high-flying tech—as much for the potential altitude of stock prices as the aircraft themselves.
To gain some perspective on where drone stocks might be headed, it pays to study the metrics behind their growing popularity. The Federal Aviation Administration (FAA) announced U.S. drone registrations passed 1 million in 2018 and have continued growing. This includes a wide variety of drones—used for photography, racing, and even search and rescue—with growth expanding into farming and package delivery.
Compare drone stocks using MarketXLS template
WACC (Weighted Average Cost of Capital) is a calculation of a firm’s cost of capital in which each category of capital (equity & debt) is proportionately weighted. The lower the WACC of a company the better, as it indicates that the company is able to raise funds at a lower cost. Ideally the Return on Invested Capital (ROIC) of a company should be greater than its WACC.
This template can be used to compare the cost of capital of up to 5 companies and understand which one is able to raise funds cheaply. Since WACC varies with Industry, ideally it should be used to compare companies in the same industry but can be used either ways as well.
Step 1: Enter upto 5 stocks to be compared in the cell range
|STOCK 1||STOCK 2||STOCK 3||STOCK 4|
|STOCK||AeroVironment Inc.||EHang Holdings Inc.||Nvidia Inc.||Amazon.com Inc.|
Step 2: The calculated WACC can be seen in the cell range below along with other useful parameters below it.
|Other Useful Parameters|
|Cost of Equity||10.5%||9.5%||7.9%||9.7%||10.8%|
|Cost of Debt||0.0%||0.0%||0.0%||0.0%||0.0%|
|Beta of Stock||1.28||1.10||0.79||1.12||1.33|
The leading drone stocks in the market
In order to make things easier for you, we have compiled a list of leading drone stocks in the market that you should consider while investing,
- AeroVironment (NASDAQ: AVAV) – AeroVironment is a growing defense contractor that focuses on unmanned aerial vehicles (UAVs). They have contracts with the Department of Defense to build military drones. AeroVironment also sells missile systems and satellite technologies.
2. Boeing (NYSE: BA) – Drones, technically known as Unmanned Aerial Vehicles (UAVs) are one of the integral technologies of our future world. Their impeccable range of features set them aside for a wide variety of uses. These compact tools were originally designed for the military and aerospace industries with their capacity to fit in a box, reach the remote corners of the world by means of flying while capturing the unknown through cameras.
3. EHang Holdings (NASDAQ: EH) – One function that drones might be used for in the future is passenger flight. EHang is a Chinese drone company that is working to make this a reality. This company initially showed off their drone technology online in 2018. EHang stock rose dramatically in February 2021 as a result of general market volatility and hype around the drone industry. However, their stock price has since dropped off of these highs. There’s still huge potential for EHang, and the stock could be a good choice for investors with a high risk tolerance. Now could be the right time to buy as the stock is down from its overall peak.
4. Nvidia (NASDAQ: NVDA) – When you think of Nvidia, you might not immediately think of drones. Nvidia is an electronics company that designs graphics processing units and other computer parts. However, many of the world’s top drone companies use these parts.Nvidia stock has already shown amazing performance in 2020 and 2021, doubling in value despite the stock market crash. However, there’s still room for growth despite the stock’s expensive price tag. In addition to their work with drones, they also make processing units and chips for gaming PCs. The gaming industry has boomed this year as people have been looking for at-home entertainment.
IMG Source: https://www.nvidia.com/ 5. Amazon (NASDAQ: AMZN) – We all know Amazon as one of the world’s largest tech companies. What started as an online retailer has now become a multi-faceted business with web services, video streaming, and much more. Amazon has a huge global delivery operation, so it’s no surprise that they’ve been considering unmanned aircraft as a delivery solution. They started testing their Amazon Prime Air delivery service in 2019. The FAA recently released a set of new rules that look very promising for Amazon and their fleet of drones. Small drones will now be permitted to fly without the special waivers that were previously required. This makes them one of the best drone stocks to watch right now.
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