The coming drone revolution offers investors an opportunity. It's difficult to predict who will benefit the most from drones, but a few companies appear well-positioned. The following four stocks give investors a way to add drone exposure to their portfolios.
AeroVironment manufacturers drones for the military
Last quarter, almost 90% of AeroVironment's (NASDAQ:AVAV) revenue came from the sale of drones. The company manufactures a variety of them for the U.S. military. Most of its drones are fairly small, and can be carried by troops to the front lines of combat. AeroVironment's Raven, for example, weighs just 4.2 lbs and has a wingspan of only 4.5 feet. It's a reconnaissance machine, intended to aid in scouting and information gathering. AeroVironment's Switchblade is small enough to fit in a backpack and can be used like a missile.
Despite the increasing popularity of combat drones, AeroVironment hasn't enjoyed much sales growth in recent years. Its drone-related revenue actually contracted 3.5% on an annual basis last quarter. The potential for the company, and by extension its stock, may lie with corporations rather than the Department of Defense. AeroVironment's management has been vocal about its desire to use its drones in commercial endeavors. Currently, it's targeting four industries for deployment: agriculture, energy, transportation, and utilities.
Unfortunately, to date, the company has produced little in the way of tangible results. "...we continue our investment to develop solutions for the commercial [drone] opportunity, which we will introduce to the market once we are confident our solution is robust and scalable," CEO Wahid Nawabi said during the company's June earnings call.
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