Friday, H.C. Wainwright adjusted its outlook on Draganfly Inc. (NASDAQ: NASDAQ:DPRO) shares, reducing the price target to $5.00 from the previous $7.00 while sustaining a Buy rating on the stock. The adjustment follows the company's third-quarter financial report, which disclosed revenues of C$1.9 million, falling short of the C$2.1 million that had been anticipated.
Draganfly's revenue has been slower to materialize, but the firm is believed to be well-positioned for future growth due to its strong product offerings and manufacturing capabilities. Despite the lower revenue, the company secured a purchase order for its Commander 3XL and Draganfly Flex (NASDAQ:FLEX) FPV Drones during the third quarter.
While this order is not expected to significantly impact short-term revenue, it is viewed as a potential turning point for the business as it moves towards scalable deployment.
The company's growing partnership with the U.S. Department of Defense is seen as a potential major revenue driver in 2025. While recent quarters have required patience from investors, the longer-term prospects for Draganfly are expected to become more evident in the coming six months. As revenues begin to scale, the path to profitability is anticipated to clarify, which could attract new investors to the stock.
The analyst from H.C. Wainwright recommends that investors take advantage of the current weakness in Draganfly shares to establish positions in anticipation of new contract wins, rising revenue, and eventual profitability. With the revised revenue forecast for 2025, the price target has been lowered, yet the firm maintains a positive outlook on Draganfly with a continued Buy rating.
In other recent news, Draganfly Inc. reported its highest third-quarter revenue to date, amounting to $1.885 million. The earnings announcement highlighted product sales of $1.3 million and services at $0.5 million, with a gross profit of $440,000, marking a 23% margin.
Despite an 11.8% year-over-year revenue decline due to inventory write-downs, the company's total comprehensive loss for the quarter significantly improved to $365,000 from a previous $5.5 million loss.
Draganfly's cash reserves exceed $3.9 million, indicating financial stability. The company also launched the APEX Drone and received significant military orders, including swarming technology and a drone-in-a-box solution. In terms of future plans, Draganfly is optimistic about new market opportunities in Australia and is evaluating potential mergers and acquisitions while remaining committed to strategic decision-making.
These recent developments underscore Draganfly's resilience and strategic approach to growth amid a competitive landscape. The company is expected to achieve its best Q4 to date, with sales funnel expanding towards higher-margin and critical-use items. Despite supply chain concerns, Draganfly supports domestic manufacturing of critical components and sees strong demand for its drones.
InvestingPro Insights
Recent InvestingPro data paints a nuanced picture of Draganfly Inc.'s financial health, adding context to H.C. Wainwright's analysis. The company's market capitalization stands at a modest $10.02 million, reflecting its current position as a small-cap player in the drone industry. Despite the recent revenue shortfall mentioned in the article, InvestingPro Tips highlight that analysts still anticipate sales growth in the current year, aligning with the analyst's view on future potential.
However, investors should note that Draganfly is quickly burning through cash and its short-term obligations exceed liquid assets. This financial strain is evident in the company's negative operating income of -$11.3 million for the last twelve months as of Q2 2024. These metrics underscore the importance of the anticipated revenue scaling and path to profitability discussed in the article.
The stock's recent performance has been volatile, with a significant 11.76% return over the last week, contrasting sharply with a -81% return over the past year. This volatility, combined with the fact that Draganfly does not pay a dividend, emphasizes the speculative nature of the investment at this stage.
For investors considering H.C. Wainwright's recommendation to establish positions during this period of weakness, it's worth noting that InvestingPro offers 16 additional tips for DPRO, providing a more comprehensive analysis for decision-making.
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