Please ensure Javascript is enabled for purposes of website accessibility

Will 2018 Be the Year of the Personal Drone?

By Chris Neiger - Updated Oct 23, 2017 at 8:09PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The consumer drone market is taking off, and new technologies launching next year should boost sales even higher.

Drones have gotten a lot of attention over the past few years as they've created new markets for everyone from weekend hobbyists to realtors to professional drone racers. Personal unmanned aerial vehicles (UAVs) -- purchased mainly by consumers for shooting pictures and videos -- make up 94% of the market. Unit sales spiked 60% in 2016, according to research firm Gartner, which forecasts a further pop of 39% this year. 

After such a huge increase in personal drone sales, some investors may wonder whether this market has plateaued. Fortunately, there appears to be plenty of room for more growth next year, and upcoming innovations mean 2018 could be a big year for the devices. But it's still unclear whether this growth will help chipmaker Ambarella (AMBA -3.31%).

GoPro's Karma drone with camera attached.

Image source: GoPro.

Why more drone sales may be on the way next year 2018

As we near the end of 2017, it's becoming clear that personal drone sales are on an upward trend. Here's what they looked like in 2016, compared to the forecasts for this year.

Metric

2016

2017

Personal drone sales

$1.7 billion

$2.3 billion

Revenue growth

35.3%

34.3%

Total units sold

2.1 million

2.99 million

Data source: Gartner.

There's no guarantee, of course, that drones sales will spike again next year, but it certainly seems likely this growth pattern will continue. For example, Gartner is expecting sales of personal and commercial drones to reach $11.2 billion by 2020, up from just $6 billion this year. 

"Personal drones will continue to increase in popularity as an affordable extension of consumers' smartphones for taking photographs and selfies and for other entertainment options," the research firm said in a press release. 

Gartner also pointed out that the increase in government regulations around personal drones has yet to hurt the market. In fact, the Federal Aviation Administration (FAA) estimates that the number in use will more than triple between 2016 and 2021. The high end of the FAA estimates puts the total number of personal drones in the U.S. at 3.18 million by next year. 

New tech could boost drone sales

Drone companies have already showcased some of the new tech set to go on sale in 2018 -- upgrades that should help keep sales humming along. For example, Ambarella's new new H22 processor chip, which will be found in drones next year, allows them to shoot 4K video, and offers a built-in electronic image stabilization feature.

This is significant for buyers because it means manufacturers will be able to remove the physical gimbals that now provide image stabilization, making these drones lighter and faster, and extending their battery life.

There could be pent-up demand for such devices. DJI, the world's top drone maker with 70% of the market, still sells many drones with physical gimbals. Ambarella has been a major chip supplier for the company in the past; if its H22 processors start finding their way into new DJI drones, the improvements could push demand even higher. 

Ambarella also showed off its new H3 chip earlier this year. It's one of the first processors that let's drones shoot 8K video, and it too could spark an uptick in sales as hobbyists seek out new devices with better video quality.

Ambarella sold about 2 million chips for the drone market last year,and the company has said that about 10% of its revenue comes from drone chip sales. But some of its largest customers have started to drift away lately. These innovations will be even more important for the company as it tries to woo those customers back.

Will 2018 be the biggest year for personal drones?

Though there's no way to know for sure what sales will look like next year, the estimates from Gartner and the FAA are quite bullish on drone market growth, and technological upgrades will give consumers fresh reasons to consider buying.

Ambarella could certainly reap some benefits from that, but investors should keep a close eye out to see which devices its chips win places in. DJI has already started using some chips from its competitors; if it loses its place in more drones, Amabarella shareholders should start worrying.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Ambarella, Inc. Stock Quote
Ambarella, Inc.
AMBA
$63.29 (-3.31%) $-2.17
Gartner, Inc. Stock Quote
Gartner, Inc.
IT
$244.28 (1.01%) $2.45

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
311%
 
S&P 500 Returns
110%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/02/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.