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Why AgEagle Aerial Systems Stock Flew Higher Today

By Lou Whiteman - Apr 21, 2021 at 3:39PM

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The FAA just cleared the way for eventual drone delivery services.

What happened

The Federal Aviation Administration (FAA) is moving forward with new rules designed to allow the use of drones in package deliveries, and that has drone stocks on the march higher. Shares of AgEagle Aerial Systems (UAVS 2.15%), a company that has been in the spotlight a lot this year, shot up as high as 20% on Wednesday before giving back some of those gains as the day went on. The stock closed 15% higher.

So what

In December, the FAA announced rules designed to address security and safety concerns for the unmanned aerial vehicles, including requiring remote identification technology to help keep track of who is flying what. There was a delay in implementing the new guidelines to allow the new administration to review them, but as of Wednesday, the new rules are now in effect.

Secretary of Transportation Pete Buttigieg called the rules "an important first step in safely and securely managing the growing use of drones in our airspace."

A drone flies over a field.

Image source: Getty Images.

We've been hearing for years about a future where drones operated by major retailers like Amazon, delivery companies including United Parcel Service, and others will take over for drivers and delivery trucks. But without a regulatory framework, that future was unlikely to materialize. With the FAA on board, drone manufacturers -- including AgEagle, which has been rumored to be working on a delivery drone -- are one step closer to making that future a reality.

Now what

Of course, a lot of this is speculation for now, and we still don't know exactly what, if anything, AgEagle has in development in terms of delivery drones. The stock is up more than 800% over the past year on investor optimism about what this maker of agriculture drones could turn into. But it was up nearly 2,400% just a few months ago prior to a short-seller report that raised questions about the business.

Investors should note that with AgEagle trading at more than 150 time sales, a lot of the potential growth is already priced in. Given the uncertainties, and the large number of deep-pocketed companies that are also investing in delivery drones, caution is warranted here.

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