Drone technology is still in its infancy, so many seasoned investors believe that this is the best moment to pick your lucky stocks for long-term gains. The industry enjoyed a massive boom due to the recent pandemic that accelerated technological advancements in this field. Drones are gaining momentum as more and more professionals use them to decrease labor time, save money, and become more efficient.

Analysts predict that the global drone market will reach $42.5 billion in 2025. With such an optimistic future for the wide adoption of drones, it might be quite difficult to select the stocks with the highest chances of grabbing the most market share. Let’s find out more about drone stocks and why these captured investors’ interest in 2021.

Are Drone Stocks Worth the Investment?

Given the latest technological advances, it is safe to argue that the world is rapidly moving towards an automated future. Drones have applications in a myriad of industries and help to cut down on labor while boosting efficiency.

For example, once the pandemic started, many companies had to shut down their human-operated facilities due to health risks. Businesses that adopt drone technology can continue their operations regardless of these restrictions. For instance, e-commerce companies could still deliver their packages by using completely autonomous drones.

Most aerial vehicles are now directed towards defense and transportation purposes. In other words, there is plenty of growth opportunity, so drone stocks are quickly attracting the attention of many investors around the world.

Drone Predictions in 2021

Specialists firmly claim that approximately one-fifth of businesses all around the world will automate their operations using drones in 2021. One of the main tenets of this argument is related to the pandemic which severely restricted the access to human resources. A study conducted by Forrester, a research company, concluded that the pandemic accelerated the adoption of commercial drones in numerous fields. This is because of the new standards for health and safety.

Most believe that the energy industry will be the main field that automates most of its operations using commercial drones. Transportation and logistics are the fastest growing sectors right now and are expected to become the second largest category by 2025, closely behind the energy industry.

Many changes have already occurred; for instance, the National Health Service in the United Kingdom has already used unmanned aircraft to transport personal protective equipment and blood tests. Shell Oil uses inspection drones, EasyJet also uses drones for thorough inspections, while Amazon’s Prime Air Service has been around for quite some years already; the company wants to use drones for deliveries so they reduce the delivery time to only one hour and a half. This could be the disruptive force that will reshape e-commerce.

Best Drone Stocks

AeroVironment (AVAV)

AeroVironment signed several contracts with the Department of Defense in order to create military-grade drones. The company is a fast-growing defense company and mostly has governmental contracts, but they also offer a few commercial models. This impressive diversity in its product offering offers a competitive edge that is so welcome in an already competitive industry.

In early 2019, AeroVironment had a market capitalization of approximately $1.8 million. It is a market leader in its niche, namely UAVs (unmanned aerial vehicles) for video surveillance and defense purposes. The company’s financials are particularly str`ong; there is no debt, the balance sheet is quite strong, while the share price in February 2021 reached $130, which is almost double compared to the same period in 2020. The company is further expected to capitalize heavily on its contracts with the US government.

In terms of estimates, AeroVironment beat those by approximately $10 million in December 2020. Although it has focused almost entirely on small models, the company is planning to expand its portfolio. The first step in this direction was the acquisition of a robotics company, known as Telerob. This German company may help it further grow its profitability and activity.

EHand Holdings (EH)

China is not a country to be neglected from an investment perspective as it is rapidly gaining global market share, even in the drone industry. For example, EHang is the world leader in terms of autonomous UAVs produced in the country; the main product offering is known as the eHang 216. This is an autonomous drone that can transport people across crowded cities.

The company hopes that its self-flying drones will also expand to firefighting, shipping, and many other fields. In 2020, its drones were approved by the Civil Aviation Administration in China for commercial use. After this, many companies in other countries have reached out to EHang in order to start trials to bring its drones to other countries.

As this might suggest, EHang could be one of the most profitable investments in the future, especially if its drones are to be sent abroad. Although the share price was quite low in March 2020, it boomed in December 2020.

EHang filed for bankruptcy in 2018 and then went public in December 2019 at a share price of $12.50. Even though the pandemic slowed it down, the company managed to reach $5.1 million in revenues in the second quarter of 2020, which means an increase of 67% year-on-year. The future is promising given the fact that EHang aims to solve the traffic issues all over the world.

Northrop Grumman (NOC)

Another defense contractor, Northrop Grumman is specialized in creating high-end drones for the US Air Force. Its best drone is known as the Global Hawk. This model is currently used for data collection and intelligence. Although the US Air Force is its main client, Northrop Grumman also works with NATO and NASA. Unsurprisingly, the price of the Global Hawk is not easily accessible.

Given its main customers, Northrop Grumman may come with extra stability and less risk for investors. It mainly serves the government; although drones are the main product line, the company also manufactures high-grade missile systems and other craft related to air and space.

Its stock has been fluctuating during the past year. In terms of share price performance, the company had a low price of $226 in December. In February 2021, the price was slightly less than its 52-week high that reached $356. Despite this, it remains a low-risk company given its existing contracts with the government, NATO, and NASA. As a result, Northrop Grumman might be a great choice for a long-term investment strategy.

Kratos Defense & Security (KTOS)

Kratos manufactures drones and other products for defense purposes for the Pentagon. Its share price increased more than 800% in the past five years. Currently, investors are excited about Kratos’s plans to create high-end drones that fly along with fighter pilots. Its Valkyrie drone has been tested by the US government for more than one year now, so everyone is anticipating a large order coming very soon.

In late 2020, Kratos won a $950 million contract with the US Air Force. Although its share price has been decreasing since February 2021, investors remain quite optimistic. The company’s management stated that their technology will offer both the Air Force and the Space Force the critical solution they need to engage with adversaries, including weapons and sensors, among others.

Parrot (PAOTF)

Parrot is a French drone manufacturer that currently targets hobbyists. Its models appeal to a broad audience due to a combination of technology, convenience, ease of use, durability, and value for money. The market for hobbyists is rapidly expanding as more and more people buy drones for personal use, including for entertainment, photography, or simply to experiment or learn to fly the device.

Despite these good reasons for investing in Parrot, the company has recently announced that it is ready to take the next steps. One of the latest models, known as Anafi USA, has become one of the best on the market. The model was designed for professional applications, including security, firefighting, or other compatible industries.

This new model could appeal to agriculture, energy, and other fields. Since it is already established on the hobby drone market, the expansion to the professional drone market can potentially absorb more market share and, ultimately, increase revenue and profits. Investors can capitalize on this long-term opportunity.

Despite this, Parrot is still emerging. With a share price below $10, it is important to exercise caution, especially for less experienced investors since there might be a higher risk for increased volatility. Keeping this in mind, there is definitely potential since the drone market is massively expanding and there’s surely a place for Parrot in the future.

Summary

All in all, drone companies are starting to change our reality. New technologies have the potential to disrupt the global economy; for instance, these can be used for military purposes, make deliveries, maintenance and inspection, and many more.

These are the top drone stocks that you should look into if you are interested in making a worthwhile investment. Since more and more companies are seeking alternatives to revive their opportunities after the pandemic, research indicates that one fifth of all companies around the world will use drone technology by 2025. This represents a rich opportunity for investors all over the world to diversify their portfolio.