What happened

Shares of drone, drone sensor, and drone software maker AgEagle Aerial Systems (UAVS -3.41%) rose sharply in the first few minutes of trading today, jumping by 13% at one point. By around 10 a.m. EST, however, that gain had been trimmed to just 5%. The big news was the company's third-quarter 2021 earnings, which were released before the market opened. The best way to describe AgEagle's financial results is mixed.

So what

On the top line the company saw massive growth, with third-quarter 2021 sales increasing to $2.02 million from roughly $750,000 in the same quarter of 2020. Management highlighted new revenue generated by its proprietary sensor and software solutions. Notably, AgEagle has been on something of an acquisition spree, with three acquisitions so far in 2021, so growth is obviously the big goal here. It's also been inking partnerships, like one it highlighted in a separate release today, announcing the inclusion of the OpenSky App into AgEagle's products. This app, which is backed by Wing, an Alphabet company, makes it easier for drone pilots to abide by aerospace rules and regulations. With these bits of news, you can see why investors might have gotten excited early on this morning.

Two people on a seesaw.

Image source: Getty Images.

Indeed, AgEagle looks like it's growing strongly, which is pretty much the story. However, small companies (AgEagle's market cap is just $220 million or so), often bleed red ink as they expand. This is because most of the company's profits get shoved right back into the company for things like research and development. There is nothing wrong with this and it isn't unusual, but it would clearly be better if AgEagle were profitable. But it isn't, given that it lost $0.05 per share in the third quarter of 2021, up from a penny-a-share loss in the same quarter last year. The company's gross profit margin fell 4 percentage points, as well. And now you can see why the early gains weren't particularly sticky. 

Now what

It's good that AgEagle is growing and investing in its business, with a focus on making its products more useful and desirable for customers. The top-line growth suggests its efforts are working. However, at some point, it still needs to make money. This is not a good option for conservative investors given its small size and still emerging business. That said, for more adventurous types, it might be worth a deep dive. However, it is worth keeping in mind that early in 2021 the stock traded sharply higher on little more than rumors and innuendo. It has since come back down to Earth, but emotions tend to run pretty high here, which showed up again in the seesaw action during the first hour of trading today.