SA Asks: What are the best drone stocks right now?

[Lockheed Martin Aeronautics Company facility in Fort Worth, TX, USA.]
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What are the best drone stocks right now for investors?

Seeking Alpha analysts AGAR Capital [https://seekingalpha.com/author/agar-capital] and Julia Ostian [https://seekingalpha.com/author/julia-ostian] offer their picks.

AGAR Capital [https://seekingalpha.com/author/agar-capital]: Warfare is changing rapidly. The use of drones has evolved from being a secondary component of warfare into a primary technology platform of modern warfare. In addition, due to their flexibility, the lower costs associated with developing, producing, and maintaining them compared to traditional military equipment, and the difficulty in developing effective defenses against them, drones will play an increasingly prominent role in future conflicts.

Two of my favorite companies operating in this emerging space are Kratos Defense & Security Solutions (KTOS [https://seekingalpha.com/symbol/KTOS]) and Red Cat Holdings (RCAT [https://seekingalpha.com/symbol/RCAT]). I believe Kratos may be the more accessible and stable of the two.

Although Kratos's current price-to-earnings ratio is high and its valuation appears somewhat elevated at present, the company represents the type of business model that I prefer when evaluating companies operating within the defense sector. Kratos has a demonstrated presence in the emerging field of unmanned systems, strong institutional credibility, and a significant backlog of orders. It also has identifiable catalysts, including Valkyrie, hypersonic systems, and overall increasing momentum toward the development of autonomous defense platforms.

Red Cat (RCAT [https://seekingalpha.com/symbol/RCAT]) is better suited for investors willing to take more risks with their investments. Compared to KTOS, RCAT is smaller and riskier. Additionally, RCAT has a number of hurdles that need to be cleared before it can establish itself as a successful company. Notably, these include establishing profitability and obtaining timely awards of government contracts. Nevertheless, RCAT's participation in the U.S. Army's Short Range Reconnaissance program places it among a relatively limited group of small-cap drone companies that have shown meaningful traction to date.

Julia Ostian [https://seekingalpha.com/author/julia-ostian]: The drone stock sector is rallying right now as a result of news that the government might increase funding for them. I’d argue it’s best to buy when the market forgets about drones and not right now.

That said, if you want to get a foot in the game anyway, there are many options depending on what type of investor you are.

If you're looking for explosive, high-risk growth, then Red Cat (RCAT [https://seekingalpha.com/symbol/RCAT]) and Ondas (ONDS [https://seekingalpha.com/symbol/ONDS]) are the most discussed ones at the moment, as both just posted massive revenue growth.

For a safer, middle-ground option, Kratos (KTOS [https://seekingalpha.com/symbol/KTOS]) offers great upside with its high-tech unmanned jet systems that are embedded in Pentagon programs. AeroVironment (AVAV [https://seekingalpha.com/symbol/AVAV]) is also a nice option; it's a stock I hold myself.

If you prefer stability, which, in my opinion, is a way smarter decision right now than small and new names, defense leaders like RTX (RTX [https://seekingalpha.com/symbol/RTX]) or Lockheed Martin (LMT [https://seekingalpha.com/symbol/LMT]) present a good entry point after the recent cool-off.

* Top Aerospace and Defense Stocks [https://seekingalpha.com/screeners/9409af15b7-Top-Aerospace-and-Defense-Stocks]

MORE ON LOCKHEED MARTIN, RTX CORPORATION

* RTX Corporation (RTX) Presents at Bernstein 42nd Annual Strategic Decisions Conference - Slideshow [https://seekingalpha.com/article/4910258-rtx-corporation-rtx-presents-at-bernstein-42nd-annual-strategic-decisions-conference]
* RTX Corporation (RTX) Presents at Bernstein 42nd Annual Strategic Decisions Conference Transcript [https://seekingalpha.com/article/4910096-rtx-corporation-rtx-presents-at-bernstein-42nd-annual-strategic-decisions-conference]
* Lockheed Martin Corporation (LMT) Presents at Bernstein 42nd Annual Strategic Decisions Conference Transcript [https://seekingalpha.com/article/4909255-lockheed-martin-corporation-lmt-presents-at-bernstein-42nd-annual-strategic-decisions]
* Lockheed Martin wins two contracts worth up to $380M for FMS support program [https://seekingalpha.com/news/4598043-lockheed-martin-wins-2-contracts-including-200m-aegis-training-deal-under-fms-program]
* Lockheed Martin delivers first ICS-enabled combat system baseline to U.S. Navy [https://seekingalpha.com/news/4598042-lockheed-martin-delivers-first-ics-enabled-combat-system-baseline-to-u-s-navy]