On Monday, H.C. Wainwright updated its assessment of Draganfly Inc. (NASDAQ: NASDAQ:DPRO), increasing the price target to $7.00 from the previous $5.00, while maintaining a Buy rating on the stock. Currently trading at $4.39, with a market capitalization of $23.21 million, the stock has shown significant volatility.
According to InvestingPro data, the adjustment follows a significant 65.0% rise in Draganfly's share price since the company reported its 3Q24 operating results on November 14, 2024. This increase starkly contrasts with the 4.0% decline in the Russell 2000 index over the same period.
The analyst attributes Draganfly's market outperformance to its recent successes in securing military contracts within the unmanned aerial vehicle (UAV) industry. Notably, the selection of Red Cat Holdings, Inc.'s subsidiary Teal Drones by the U.S. Army for its Short Range Reconnaissance Program in mid-November has brought attention to the sector. The program is expected to generate substantial revenue for Red Cat, highlighting the growing importance of UAVs in military operations.
Draganfly's engagement with the Department of Defense, including a small purchase order for its Commander 3XL drone announced in September, is seen as a positive indicator of the company's potential to secure larger military contracts. Draganfly's management has indicated that such contracts could propel the company's annual revenue to multiples of its current levels, with expectations of significant orders materializing in early 2025.
Despite Draganfly's recent share price appreciation, its valuation is still considered to be trailing its peers, trading at just 2.0x 2025 revenue estimates compared to the 5.0x to 8.0x range of its competitors. InvestingPro analysis indicates the stock is currently undervalued, though investors should note the company's WEAK financial health score and negative EBITDA of -$10.03 million.
This suggests that there may be room for the stock to grow as the company begins to announce new contracts. Get access to 15+ additional ProTips and comprehensive valuation metrics with InvestingPro's detailed research report.
The analyst concludes that with the anticipation of new contract announcements and increased investor interest in the UAV space, Draganfly's stock is poised for further gains. The company maintains a healthy balance sheet with more cash than debt and a current ratio of 1.94x, though it's worth noting the -15.66% revenue decline in the last twelve months.
Therefore, the price target has been adjusted to reflect this potential, although no changes have been made to the firm's revenue estimates at this time. For deeper insights into Draganfly's financial health and growth prospects, access the complete Pro Research Report available on InvestingPro.
In other recent news, Draganfly Inc. reported its highest third-quarter revenue to date, amounting to $1.885 million, with product sales of $1.3 million and services at $0.5 million. Despite an 11.8% year-over-year revenue decline, the company's total comprehensive loss for the quarter improved to $365,000 from a previous $5.5 million loss. H.C. Wainwright adjusted its outlook on Draganfly, reducing the price target while sustaining a Buy rating on the stock.
The company also launched the APEX Drone and received significant military orders. These recent developments highlight Draganfly's strategic approach to growth and resilience amid a competitive landscape. The company is evaluating potential mergers and acquisitions and is optimistic about new market opportunities in Australia. Draganfly's growing partnership with the U.S.
Department of Defense is seen as a potential major revenue driver in 2025. The company's cash reserves exceed $3.9 million, indicating financial stability. Analysts from H.C. Wainwright recommend that investors take advantage of the current weakness in Draganfly shares in anticipation of new contract wins, rising revenue, and eventual profitability.
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