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 of Janurary 2022, here are the top drone stocks across the industry from defense to commercial, based on IBD Composite Ratings and market cap.
The Composite Rating — which combines earnings, relative strength and 52-week stock performance, among other factors — can be used as a screening tool as part of a broader investing strategy. Other factors investors should consider include chart analysis that shows if a stock is in a buy zone, where the stock is trading vs. its moving averages, and whether it’s in an early- or late-stage base.
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Boeing Rising As Drone Stock
While better known as a maker of airliners and fighter jets, Boeing (BA) has emerged as a big player among drone stocks with a number of vehicles in its arsenal. The aerospace giant is building the MQ-25 Stingray aerial-refueling drone for the Navy. It will be the service’s first carrier-based drone.
The drone finished carrier-based tests on the USS George H.W. Bush in December. Earlier in the year the drone successfully refueled a U.S. Navy Boeing F/A-18 Super Hornet, the first time an unmanned aircraft has refueled another plane. The program is expected to hit initial operational capability in 2025.
Boeing is also working on the Airpower Teaming System or “Loyal Wingman” military unmanned aerial vehicle (UAV). It will use artificial intelligence to fly alone or with other aircraft.
Boeing subsidiary Aurora Flight Sciences was among the teams competing in Darpa’s AI dogfight competition.
Another Boeing subsidiary, Insitu, builds the ScanEagle, a small, long-endurance, low-altitude drone for reconnaissance. Insitu also builds the RQ-21 Blackjack for the Navy and Marine Corps.
Boeing has a market capitalization of $128 billion. The aerospace giant has a weak Composite Rating of 44 out of 99, according to IBD Stock Checkup as it faces headwinds at its commercial division.
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Northrop Grumman: Early Leader
Northrop Grumman (NOC) was among the early leaders in drone stocks as the Pentagon ramped up the deployment of pilotless aircraft.
Its RQ-4A Global Hawk surveillance drone took center stage in 2019 after it was shot down by Iran while operating in international airspace over the Strait of Hormuz.
Northrop also makes the MQ-4C Triton, which is based on its Global Hawk drone and is for use in maritime environments. In addition, the company makes the Fire Scout, which is a rotary-wing drone that can operate from Navy ships.
The defense contractor has a $62 billion market cap. Its Composite Rating is 77 and its EPS Rating is 79.
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Lockheed Martin Goes Small
Lockheed Martin (LMT) isn’t a dominant drone stock but the F-35 maker has a number of small drones in its product lineup. These include the Stalker XE for special forces units, Desert Hawk III for U.K. forces, and the avionics for small quadcopter drones used by police.
But Lockheed has invested in AI technology. Lockheed announced a partnership in May 2020 between the Air Force Test Pilot School and the company’s Skunk Works division to strengthen the Air Force’s drone technology with AI.
Lockheed has a market cap of $100 billion. The drone maker has a 70 Composite Rating and 86 EPS Rating.
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Kratos Emerges As Drone Stock
Kratos Defense & Security Solutions (KTOS) made its mark on the drone stocks scene with a major Air Force deal in 2019.
The XQ-58A Valkyrie demonstrator drone completed its inaugural flight on March 5 2019 at the Yuma Proving Grounds in Arizona for the Air Force Research Lab.
Kratos, Boeing, and privately held General Atomics are also developing prototypes for the Air Force’s Skyborg autonomous drone program.
Kratos has a market cap of $2.1 billion. Its Composite Rating is 39 and its EPS Rating is 77.
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AeroVironment Top Pentagon Provider
While not as large as some of the other drone stocks, AeroVironment (AVAV) is the Pentagon’s top provider of drones. The company says its Raven drone “is the most widely used unmanned aircraft system in the world today.” It’s now developing small hand-launched drones for the military.
AeroVironment built the Mars helicopter Ingenuity for NASA which performed the first controlled flight on another planet in April. The helicopter was originally set to perform only a handful of flights but has completed 18 successful flights as of December. The achievement caught the attention of the world and has already lined up more customers for AeroVironment.
On the commercial and government side, oil giant BP (BP), the National Park Service and law enforcement agencies have used AeroVironment’s drones.
AeroVironment has a market cap of $1.5 billion with a 44 Composite Rating and a 60 EPS Rating.
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Amazon, Alphabet Poised To Shake Up Market
The e-commerce giant and Google parent could be disruptive players among drone stocks.
Last August, the Federal Aviation Administration granted Amazon (AMZN) approval to deliver packages with its MK27 all-electric drones. But development has stalled and the company has since cut jobs at its Amazon Prime Air division.
Amazon has a market cap of $1.7 trillion with a perfect 78 EPS Rating and 63 Composite Rating.
While Amazon struggles to get off the ground, other services are growing. In April 2019, Alphabet‘s (GOOGL) Google Wing received certification from the FAA following successful certification from the Australian government.
Wing started service in Christiansburg, Va. and saw demand for drone delivery surge amid the Covid-19 lockdowns. The service hit 100,000 deliveries in August and has expanded into Finland. It’s currently performing demo flights in Dallas, Texas.
Alphabet has a market cap of $1.9 trillion. The tech giant has a 92 Composite Rating and a 98 EPS Rating.
Follow Gillian Rich on Twitter @IBD_GRich for defense news and more.
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