Saturday, November 28, 2015

Will Someone Buy Me a Drone Stock for Christmas?

Drones Will Soon Change The Way Of Doing Business

Drones are a technological advancement that have been making headlines recently. Typically, it has been for all the wrong reasons. They have been spotted flying too close to airports, and they have been caught smuggling drugs into prisons. They have even been used to spy on neighbors sunning in their backyard. When used in the right form, drones are a wonderful form of technology. They are helping businesses to make great strides and stay ahead of the competition.

Drones may soon be used by businesses that provide goods to customers. They'll be able to deliver customer's packages right to their very own doorstep! This will greatly change the world of home deliveries. No longer will customers have to go through the hassle of picking their goods up from a store. No longer will customers have to wait for delivery personnel to drop off their packages. This in turn will make customers happier. A happier customer means a happier business. Drones will also be able to cut costs in the long run. One reason they are cost-effective is because they will accomplish deliveries quicker than anything else has previously.

This form of technology will also be used by oil and gas companies. It will allow companies to do routine inspections. The drone will also be able to do surveying for a variety of other businesses. All in all, these will work to make the lives of businesses easier.

Currently, drones are available for recreational use. There are several rules that a person must abide by, however. They cannot be flown in close proximity to an airport. They also can only be flown in the daylight hours. 

Right now, it's a waiting game until the FAA comes out with their final list of rules. Businesses can get a jump start by applying for a certificate and an exemption in hopes to start testing out their technology earlier than others. The upcoming Federal Aviation Administration rules that are planned will put stricter requirements on them than those used for personal use, for safety reasons obviously.

So how does an investor take a flyer on a drone stock that won't crash and burn? One of the purest plays in the drone industry is AeroVironment (AVAV), which produced the Pointer drone in 1987, considered to be the first small unmanned aircraft system, also referred to as a UAS, unmanned aerial vehicle, and UAV, for military use. The company now makes severals UASs, including the Puma, Raven, Wasp, and Shrike, for business and governmental use. 

AeroVironment is currently generating negative earnings and trades at an stratospheric 82 times forward earnings. However, the company does have a couple things going for it. First of all, it is debt free. Second, the company is sitting on $9.48 in cash per share. 

Another way to play the drone market, although in a small way, is Amazon (AMZN),  which is involved in drones two different ways. It is developing Amazon Prime Air in several countries, which will provide 30 minute delivery services using small drones. 

In addition, Amazon actually sells drones to the consumer. (Here's an idea. If I order a drone from Amazon, will a drone deliver my drone?) For example, if you want to go high end, you could order the DJI Inspire 1 Transforming Single Control Quadcopter With 4K Camera RTF which retails for $3,615.
Or maybe, you want to experiment with a more reasonably prices UAV. One of the company's best sellers is the UDI Axis Gyro RC Quadcopter.
Another popular one is the Syma Explorers Axis Gyro RC Quadcopter.

Amazon also has nosebleed level ratios, with the P/E at 965 and a forward P/E at 119. Revenues for the latest quarter were up 23%, year over year.

There are actually over a dozen stocks involved in drones and UAVs in some way or another. A free list of the drone stocks is available at Anyway, with three major markets for this product, business, military, and consumer, the drone business has nowhere to go but up.

Disclosure: Author owns AMZN.


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