Unusual Machines Inc. (UMAC:NYSEAMERICAN), a U.S. drone components manufacturer and supplier, invested US$25 million (US$25M) in XTI Aerospace Inc. (XTIA:NASDAQ) whose core business is large vertical takeoff and landing (VTOL) aircraft, reported Needham & Co. Analyst Austin Bohlig in a November 12 research note. This investment coincided with XTI announcing its acquisition of Drone Nerds, the largest drone distributor and service provider in the U.S.
"We believe the investment could have robust implications on Unusual Machines' position in the emerging commercial market," Bohlig wrote. "Given the company's lean operating model and cash burn, we believe this is an effective strategy for UMAC to drive value for shareholders."
84% Upside Implied
Needham & Co. has a Buy rating and a US$20 per share (US$20/share) target price on Unusual Machines, noted Bohlig, because the company is well-positioned to deliver significant growth over the next several years. Working in its favor in this regard are its robust component portfolio, the ramp-up of its new manufacturing facility and its expected addition of more components, organically and through mergers and acquisitions.
"We believe UMAC's robust growth profile, scarcity value and strong ties to the Trump Administration justify a premium 15x enterprise value:sales multiple compared to our drone comp group," Bohlig added.
Compared to the US$20/share target price, Unusual Machines was trading at the time of Bohlig's report at about US$10.86/share. From this price, the return to target is 84%.
The company has 36.88 million shares outstanding. Its market cap is US$400.5M. Its 52-week range is US$2.34–23.62/share.
Investment Details
Unusual Machines' US$25M investment in XTI Aerospace was via private placement and with 25,000 shares of newly designated Series 10 Convertible Preferred Stock. At the same time, XTI Aerospace announced its acquisition of Drone Nerds for US$40M.
This is Unusual Machines' fourth and largest strategic investment, the others being Safe Pro Group Inc. (SPAI:NASDAQ), LightPath Technologies Inc. (LTPH:NASDAQ) and Kopin Corp. (KOPN:NASDAQ).
As for Drone Nerds, it generated US$100M in revenue last year and US$55M from sales during H1/25. Its business could grow significantly as companies and other entities expand their commercial drone deployments, Bohlig wrote.
Plus, the commercial market could see additional growth if the Federal Aviation Administration's final rule on routine Beyond Visual Line of Sight (BVLOS) flights, expected in early 2026, allows for more such operations.
Why XTI Aerospace?
Bohlig explained the likely rationale behind UMAC choosing XTI Aerospace as the company in which to invest. A U.S. ban is imminent, potentially by year-end, on U.S. imports and sales of all China-made commercial and consumer drones and drone components, including DJI (Da-Jiang Innovations) products. DJI is China's largest drone maker and the world's largest consumer and commercial drone manufacturer by market share. The ban will happen by default, according to the 2025 National Defense Authorization Act (NDAA), if the federal government fails to conduct a required national security risk assessment by Dec. 23. Such a ban would go into effect at the beginning of 2026.
If the ban happens, the U.S. will need a domestic supplier to replace DJI and thereby meet growing commercial demand. Drone Nerds will need a supplier of NDAA-compliant drones given that it sells mostly DJI products. This is where Unusual Machines could come in and meet the need.
"We believe Unusual Machines is among the best-positioned domestic suppliers of flight-critical, NDAA-compliant components to capitalize on this reshoring trend," Bohlig wrote. "With only a handful of small domestic players competing in this space, we see a clear path for the company to capture a significant amount of the estimated US$620M U.S. component market in 2026."
Thus, UMAC's investment in XTI Aerospace had more to do with Drone Nerds and the expected DJI ban, wrote Bohlig. It was a strategic play to improve its visibility as a key drone parts supplier and improve its relationships with leading commercial drone providers.
Near-Term Business Focus
Until the time that Unusual Machines could start to benefit from the DJI ban, the company will continue fulfilling its US$16M defense order backlog, wrote Bohlig. Also, once the U.S. government shutdown ends, federal drone purchasing should soon pick up meaningfully as the roughly US$2 billion in unmanned aerial system funding from the One Big Beautiful Bill starts getting spent. Further, the Department of War announced last week it intends to buy 1 million drones over the coming years, largely fueled by the U.S. Army's SkyFoundry program to produce low-cost drones internally.
"Given Unusual Machines' unique position to provide parts for high volume programs such as SkyFoundry and Purpose-Built Attritable Systems (PBAS), we continue to view UMAC's growth trajectory and expanding order pipeline favorably and see further potential upside to our 2026 estimates as demand for attritable drones inflects in 2026."
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Important Disclosures:
- Unusual Machines Inc. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$3,000 and US$6,000.
- As of the date of this article, officers, contractors, shareholders, and/or employees of Streetwise Reports LLC (including members of their household) own securities of Unusual Machines Inc.
- Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
- This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company.
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Disclosures for Needham & Co., Unusual Machines Inc., November 12, 2025
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