Drone Company Closes Deal With US Worth US$1.8 Million

According to a press release from Red Cat Holdings, Inc., (RCAT:NASDAQ) the company has finalized a deal for US$1.8 million with the United States Customs and Border Protection (CBP) through its subsidiary company, Teal Drones.

According to the company, the agreement stipulates that the company’s subsidiary, Teal Drones will provide 106 drones, along with spare parts and training to facilitate the operation of those drones. Teal Drones is not the only company operating within this deal with CBP, as the press release reports that it is part of a Blanket Purchase Agreement (BPA) that includes five drone companies besides Red Cat. This BPA is worth an estimated US$90 million, and has included past purchases from Teal Drones worth US$1 million.

Increased Military Aid in Drones for Ukraine

According to US News, the US has indicated that it intends to provide military aid valued at US$1.3 billion for Ukraine, which includes drones and counter drone technology. To date, US News reports that the US has provided roughly US$10.8 billion in military aid to Ukraine to assist in its conflict with Russia, a conflict which has seen heavy use of armed drones.

The Associated Press reports that the US has okayed the delivery of major military equipment to Ukraine in the form of F-16 fighter jets, adding further air power on the side of Kyiv.

A Screaming Buy

Technical Analyst Clive Maund reviewed the company most recently on July 27 of this year. Maund commented that “this is regarded as a very good point to add positions,” based on the company’s stock performance. According to Maund, “if it breaks out of [a Pennant pattern] by breaking above the resistance shown at the top of it in the US$1.45- US$1.53 zone, it could run quickly to the vicinity of the highs of last November in the US$2.60 area and perhaps continue higher.”

A ThinkEquity research report from earlier this year reviewed the company positively. According to the research report, “ThinkEquity expects Red Cat’s revenue and operating income to increase. The investment bank estimates revenue will reach US$11.9 million in FY23 and then more than triple to US$37 million in FY24. Also, it projects an increase in operating income during that same period to US$2 million from US$19 million.” The report identified the company’s infrastructure and contracts with the US government as causes of the company’s increased revenue potential.

Chris Temple of the National Investor rated the company as a “screaming buy” for investors last year. According to Temple, “the value proposition here is mind-blowing when you look at Red Cat’s potential business in the months, to mention years, ahead, I.M.O.; which is why I am starting it as a buy and adding it to my list of growth-oriented companies.”

Ownership and Share Structure

Reuters provided a breakdown of the company’s ownership and share structure, where management and insiders own 36.09% of the company. According to Reuters, Jeffery M. Thompson owned 22.09% of the company with 12.29 million shares, Gregory Ralph French owns 8.65% of the company with 4.82 million shares, Allan Thomas Evans owns 2.40% of the company with 1.34 million shares, Nicholas Reyland Liuzza Jr. owns 1.75% of the company with 0.98 million shares, Joseph P. Hernon owns 0.65% with 0.36 million shares, and George Michael Matus owns 0.55% with 0.31 million shares.

According to Reuters, institutions own 5.23% of the company, as The Vanguard Group, Inc., owns 2.29% with 1.28 million shares, Pelion Venture Partners owns 1.61% with 0.90 million shares, Essex Investment Management Company, LLC, owns 0.71% of the company with 0.39 million shares, and Geode Capital Management, LLC, owns 0.62% with 0.34 million shares.

Reuters reports that there are 55.64 million shares outstanding, with 34.33 million free float traded shares. According to Reuters, the company has a market cap of CA$51.95 million shares, and trades in the 52 week period between CA$0.77 and CA$1.81.

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