$10 a share. $9 a share. $8. Lower. For the past three trading days, space-and-defense stock Redwire (RDW +1.69%) has gone nowhere but down, losing more than 20% of its market capitalization in total -- including an 11% loss through 12:05 p.m. ET Thursday.
The question is why?
And the answer appears to be: "Drone Dominance" -- or rather the lack thereof.
Image source: Getty Images.
Redwire's big new business
In case you've forgotten, Redwire began life as a space stock, specializing in orbital infrastructure -- but became a defense stock, too, when it bought military drones specialist Edge Autonomy for $925 million early last year.
Owning Edge opened up the military market to Redwire. It also opened the stock up to speculation by momentum investors hoping that Redwire might get a piece of the action as the U.S. Pentagon began emphasizing purchases of cheap, first-person-view (FPV) attack drones in a program known as Drone Dominance.
Reports of the initial winners of Drone Dominance began dropping last week, when the Pentagon picked 25 companies to compete for the $1.1 billion program. Unfortunately for Redwire, its name was not on that list.
NYSE: RDW
Key Data Points
Is Redwire stock a sell?
Redwire's price decline aligns with the timing of the Pentagon's Drone Dominance announcements -- and by implication, with the fact that Redwire was not one of those winners. I suspect this is the reason Redwire stock has been going down lately.
It's not necessarily a good reason, however. Priced at just 5 times trailing sales, Redwire is currently one of the cheapest space stocks on the market. With Edge in hand, it's also expected to report its first-ever positive free cash flow this year: $26 million, according to Wall Street analysts.
Whatever its success as a defense stock, Redwire looks cheap as a space stock.
