Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of AgEagle Aerial Systems Are Up Today

By Lou Whiteman - Jan 20, 2021 at 12:48PM

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

This high-flying drone stock continues to defy gravity.

What happened

Agriculture drone manufacturer AgEagle Aerial Systems (UAVS 1.10%) is gaining altitude again, up as much as 19% on Wednesday morning before falling back some. The stock has more than doubled in the first few weeks of 2021 on little company-specific news, a trend that shows no sign of reversing at this moment.

So what

It's hard to say what to make of AgEagle, a company with a lot of potential but so far not much to show for it. AgEagle generated $750,325 in revenue in the third quarter last year, and $1.16 million in the first nine months of 2020. That's up 1,700% year over year for the quarter and up 974% for the nine-month period, but seemingly not nearly enough to justify AgEagle's $750 million market capitalization.

A drone hovers over a field.

Image source: Getty Images.

Just a year ago, AgEagle was a penny stock, valued by the market at less than $10 million. That all changed last year when speculation began to build that the company was working with Amazon on a retail delivery drone, helping put the stock on a lot of investor radar screens.

Nothing has come of that Amazon talk yet, but AgEagle shares have also gotten a boost from larger drone maker AeroVironment's planned acquisition of Arcturus UAV. That's a reminder that there is potential for consolidation among drone makers, especially as defense contractors trying to broaden their portfolios and gain new expertise.

UAVS Chart

UAVS data by YCharts

Now what

There is no way to use numbers to justify AgEagle's valuation. The company needs to generate substantial growth in the quarters to come, or the stock rally will likely be unsustainable.

AgEagle in a September investor presentation noted drones remain a "highly fragmented industry comprised largely of start-ups or companies with less than $5 million in annual revenue." Count AgEagle among them, but as the company notes very few are publicly traded and with nearly $25 million in cash at their disposal. There are likely deals to be done if AgEagle wants to buy growth in the months ahead.

Otherwise, we are going to have to see real traction with the e-commerce delivery drone talk to even begin to justify the current stock price. It's possible, but given the uncertainty I'd advise investors watch this story play out from the sidelines.

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

AgEagle Aerial Systems, Inc. Stock Quote
AgEagle Aerial Systems, Inc.
UAVS
$0.79 (1.10%) $0.01

*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 service.

Stock Advisor Returns
330%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/22/2022.

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.