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It’s a plane! It’s a bird! It’s a…drone

27 January 2017 in Trading Ideas

Drones aren’t just for military applications anymore. Now, hobbyists, filmmakers, farmers, athletes and more are using drones in numerous ways. More people are expected to buy and use drones in the coming years, especially since in last August, the Federal Aviation Administration began registration for its first-ever class of commercial drone pilots, with less burdensome requirements.

Sales of drones are expected to exceed $12 billion in 2021, an increase from $8 billion in 2015. Grand View Research predicts the drone market will grow at a compound annual growth rate of about 16.9 percent through 2022.

With drone technology only expected to increase, investors should consider investing in this relatively new technology. The following companies are worth looking into when it comes to investing in drones.

GoPro

Late last year, GoPro launched Karma, its first consumer drone. While GoPro is late to the drone market, the company believes it can leverage its relationship with retailers, its well-known name and its camera to take a leadership position in the consumer drone market. GoPro’s stock has been a disappointment since it went public in 2014, with shares down about 70 percent last year. However, GoPro estimated it will generate between $1.35 billion and $1.5 billion of revenue in 2016, down from $1.6 billion in 2015.

InvenSense

While InvenSense isn’t a direct provider of drones, it provides essential technology that drones use: micro-electro-mechanical system gyroscopes. As the drone market grows, so will the demand for gyroscopes and InvenSense hopes to capture a large share of that market.

Ambarella

Ambarella is another company that doesn’t make drones, but provides drone-related technology. The company makes chipsets and software that record and transmit high definition videos and its technology are used by many in the video industry, including GoPro. Since most drones including high-end digital cameras, many of Ambarella’s chips are including in these drones.

Lockheed Martin

Major military contractors are a good place to invest in drone technology, since they continue to supply militaries with drone technology. Lockheed Martin is one of several defense contractors that are on the cutting edge of drone technology. The company makes numerous military drones, including the K-MAX, an unmanned cargo helicopter.

Boeing

An estimated 20 percent of Boeing’s annual revenues are from military sales and part of that is from drones. Boeing’s Phantom Eye can fly at an altitude of 65,000 feet, but only for four days. But this drone can provide an ongoing flow of intelligence and communications that can be valuable for both military and commercial ventures.

Northrop Grumman

As one of the nation’s largest defense contractors, Northrop Grumman has annual revenues in the billions. While drones are just a small percentage of that revenue, it will most likely grow as drone military applications increase in the near future. The company produces the Global Hawk, an unmanned aerial drone that tracks activity at more than 60,000 feet, which was produced after the 9/11 attacks. The company continues to provide drones to the U.S. military for other uses.

Amazon

Being one of the largest delivery operations in the world, Amazon has looked to drones to deliver packages to its online customers. Amazon’s “Octocopter” program will feature a fleet of Amazon Prime Air helicopter drones delivering packages in the near future. While the program is still in development and needs FAA approval, if it goes through Amazon will be on the cutting edge of a major industry shift. Another company looking to make drone-related deliveries is Dominoes, who made its first drone delivery last year.

 

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