AgEagle Aerial Systems (NYSEAMERICAN:UAVS) is yet another of the many penny stock stories captivating the market in 2020. Shares of UAVS stock have soared over 136% since July 1 of this year. Robinhood investors have been leading the charge. But unlike some of their other speculative forays this time, they may be on to something.
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I’m late to the party on AgEagle. The company is a leading provider of technological solutions for the agriculture industry. AgEagle provides best-in-class drones and data analytics for hemp and other commercial crops.
However, that’s not the reason the company’s stock is surging. UAVS stock is climbing because the company sees an opportunity to take advantage of the country’s urgent need for made in the U.S.A. drones. And it has entered into a contract with an unspecified “major ecommerce company.”
Many are speculating that the company is Amazon (NASDAQ:AMZN). But even if it’s not, the bullish case for AgEagle seems to hold up. However, investors who want to jump into the stock need to manage their expectations. Significant growth is likely to take time.
If It Was Easy It Would Already Be Done
In 20 years, and probably sooner than that, drone delivery will be commonplace. Parents of young children will have to pretend to caution Rudolph to avoid the drones as he guides Santa’s sleigh. I agree with Josh Enomoto, drone delivery is a reasonable speculative bet because it solves a logistical dilemma.
In fact, if package delivery via drone really does go mainstream, we may wonder why it took us so long. But that’s the point. If it was easy to make this a reality, it would have already been done. Sure, having someone like Jeff Bezos behind it will add gravitas, but this is still going to take some time.
As AgEagle writes in an investor presentation, the “Industry lacks engineering and quality manufacturing expertise in drone market.”
Regulation Is Coming
Six words struck me in AgEagle’s September investor presentation: “mechanisms for oversight are catching up.” By mechanisms, they’re talking about regulatory mechanisms. One of the issues with large scale commercial use of drones is insurance risk.
In February 2020, the Federal Aviation Administration released its Notice of Proposed Rulemaking (NPRM) about drones. The good news is that it seems that it’s gotten the attention of companies that were hesitating to invest in drone manufacturing and operations.
The question for investors is once again time. There’s no doubt that drones will get insured. But how long will it take? The answer is likely shorter than investors think but longer than a company like AgEagle would like.
Is the Past Predictive?
Of course, if you’re a cynic about AgEagle, you would point out that we’ve heard this all before. As David Moadel points out ten years ago, UAVS stock fetched a pretty price. And even as recently as 2014, shares were briefly trading at over $100 per share. But since 2015, the stock has been on a steady decline to today’s penny stock level.
And some of that drop, I’m sure, is that the commercialization of drones didn’t materialize. If this time is really different, it would appear that AgEagle could make investors very happy.
UAVS Stock Requires Patience and Time
Robinhood investors have made penny stocks like AgEagle popular speculative choices in 2020. I’ve written about several of them. And mostly I’ve been unimpressed. But UAVS stock is one that I like. In time.
As our Louis Navallier cautioned investors, if you wait until the stock takes off you’ll be too late. With that in mind, I’m okay with taking a speculative bet on AgEagle. With a major e-commerce partner on board, they’ll make it to whatever the next stage looks like.
But with a lot of regulatory issues to be worked out, you may be waiting on that side of the business. In the meantime, the company appears to have a nice head start on competitors who are in the space.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for over six years. He has been writing for Investor Place since 2019.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.