Red Cat

Demand for military drones is surging, and Red Cat is scaling fast to meet it. Full-year revenue grew 161% to over 40 million dollars, and in the most recent quarter revenue jumped roughly 849% from a year earlier. Management is targeting 150 to 180 million dollars in annual revenue as new orders land.

Governments are pouring money into drones because they are cheap and effective in modern warfare. The company points to a roughly 700 million dollar sales pipeline for the Black Widow alone, and has secured orders from a NATO ally and Asia-Pacific partners. They built capacity to eventually produce over 1 billion dollars of drones and boats a year.

Red Cat is nowhere near profitable. Net margins are deeply negative at about negative 138%, and the company burned roughly 89 million dollars of cash from operations last year. To keep funding growth it has raised money repeatedly, which dilutes existing shareholders.

The stock price is built on what the company could become, not what it earns today. The business depends on winning big government contracts that have not all materialized, it was passed over for the first round of the Pentagon's drone program, and it is building large inventory ahead of orders that may arrive late or smaller than hoped.