Unusual Machines (UMAC) Stock: A Volatile Ride After Red Cat Holdings Order
Unusual Machines (NYSEMKT: UMAC), a drone and drone parts manufacturer, experienced a surge in stock price on Friday following an announcement of an $800,000 order from Red Cat Holdings (NASDAQ: RCAT). However, the initial gains of over 15% were largely reversed, leaving shares up only modestly by mid-morning.
Unusual Machines: A Drone Industry Player
Unusual Machines specializes in producing drones and drone components for both consumer and military applications. Their product line includes branded "Fat Shark" ultra-low latency video goggles, designed for drone pilots, and "small, acrobatic FPV drones." The company aims to cater to diverse drone needs.
The Red Cat Holdings Order
The $800,000 order from Red Cat Holdings is for several key components: "Aura Analog Camera, Aura VTX, Brave Flight Controller, Brave ESC, HDO+ Goggles, and motors." These components will be integrated into Red Cat's FANG drones, indicating a significant collaboration between the two companies.
Investment Perspective: Is UMAC a Buy?
The ongoing war in Ukraine has fueled investor interest in military drone companies. While stocks like AeroVironment (NASDAQ: AVAV) have seen substantial gains (around 570% since the start of the war), their lack of profitability and cash burn present an opportunity for new entrants focusing on smaller, cheaper drones.
Concerns and Recommendation
Despite the potential, the article's author remains unconvinced about Unusual Machines as a sound investment. The company is currently unprofitable, having lost $39.5 million in the past year, and is burning cash. Securing orders under $1 million is unlikely to quickly reverse this trend, and analysts predict continued losses in the coming years. Therefore, the recommendation remains a "sell" for Unusual Machines.
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