UMAC

Last Friday, Unusual Machines Inc. (UMAC:NYSE) reported it had been chosen to provide the first drone and components in Red Cat Holdings Inc.'s (RCAT:NASDAQ) new FANG™ line of First-Person View (FPV) systems. 

This partnership helps Red Cat meet the Pentagon's goal of producing many low-cost drones quickly. Unusual Machines brings knowledge and manufacturing skills to make these drones reliable and perform well. Unusual Machines is also part of a group called the Red Cat Futures Initiative. This group brings together different companies to create better-unmanned aircraft systems that work well together and can help soldiers. 

In light of this news, UMAC CEO Allan Evans said, "We are excited to kickstart our enterprise business and domestic production while working with the people we know very well at Red Cat. Their team is committed to providing the warfighter with the best set of solutions possible, and we are committed to providing them with a robust, high quality, low-cost supply chain that is proudly made in the U.S.A."

RedCat CEO Jeff Clark also commented, saying, "We have a longstanding relationship with Unusual Machines with the divestiture of our consumer drone business, and the recent introduction of our new Family of Systems provides the perfect time to partner on the development of our first FPV drone with strike capability. First-Person View drones are becoming highly prevalent on the battlefield, and we see significant opportunities to develop a line of FPV systems with a wide range of tactical capabilities."

Why American Drone Parts?

The drone market is anticipated to grow in both the commercial and defense sectors. 

According to Grand View Research, "the global commercial drone market size was estimated at US$19.89 billion in 2022 and is expected to grow at a compound annual growth rate (CAGR) of 13.9% from 2023 to 2030." 

Unuaul Machines has a foothold in the commercial drone business; however, it is pivoting some of its focus toward defense contracts. Demand for drones and drone parts in the defense sector is large. 

Fortune Business Insights noted that "The global military drone market is projected to grow from US$14.14 billion in 2023 to US$35.60 billion by 2030, at a CAGR of 14.10% during the forecast period."

Currently, as noted by Bloomberg, "Chinese drones command about 90% of the US consumer market and 70% of the industrial one." However, the United States is attempting to pivot away from China as a supplier. 

With the United States sending legislation to remove Chinese manufacturers from the equation regarding military drones, Unusual Machines is hoping to fill that anticipated void. 

As shown in the business model from its investor presentation, the company plans to transition U.S. component manufacturing to more business-to-business (B2B) channels with U.S. manufacturers that require a domestic supply. This need for domestic supply is only going to grow as multiple legislative catalysts are on the horizon. 

Catalysts

Unusual Machines has multiple legislative catalysts on the horizon, as detailed by Technical Analyst Clive Maund in a June 20 article.*

The first is the seasonal round of government contracts that will begin near the end of July. This will go on until September. This will be escalated due to last year's budget cuts, as well as the possibility of the  the American Securities Drone Act coming into effect in Jan 2026. 

Maun mentioned this act could lead to the company winning  "major orders that would "light a fire" under the stock."

The the CCCP (Chinese Communist Party) Drone Act could also catalyze the stock as it could increase sales of its Fat Shark products, video transmitter products, and FPV (First Person View) goggle through the exclusion of China from the market. 

A Buy-Rated Stock

After detailing possible catalysts for Unusual Machines, Clive Maund spoke about the incredible faith Red Cat Holdings has in the company.

He wrote, "There are only just over 9 million shares in issue, although this is believed to now be nearer to 10 million. Of these, almost half, or 47%, are owned by Red Cat Holdings, which was the parent company of Fat Shark and Rotor Riot that the company acquired in February, so there are only about 3 million shares in the float."

Maund then went to review the charts for Unusual Machines. After his analysis, Maund concluded that the company "is therefore rated an Immediate Strong Buy.

In a June 17 research note, Dr.  Ashok Kumar also shared optimism for Unusual Machines, giving the company a Buy rating and a target price of US$4. This is an around 185% increase from the price at the time of this article of US$1.42.

Ownership and Share Structure

About 4% of UMAC is owned by management and insiders, according to the company, and about 47% is held by strategic investor Red Cat Holdings Inc. The rest is retail.

The company's market cap is US$12.97 million, according to Market Watch, with 9.33 million shares outstanding with 2.25 million free float shares. It trades in a 52-week range of US$1.37 and US$1.47.