Drones are becoming very widely used in wars and will likely play a significant role in delivering packages for e-commerce companies over the longer term. In Ukraine and Gaza, drones are being deployed on a large scale. Both Ukraine and Russia have frequently used drones to attack each other. For example, Ukraine is attaching bombs to small drones and directing them to Russian targets. And in Gaza, Israel is using drones to attack Hamas fighters and explore the terrorists’ tunnels. Meanwhile, many militaries around the world are investing tremendous amounts of money in drones. Turning to e-commerce, Walmart (NYSE:WMT), Target (NYSE:TGT) and Amazon (NASDAQ:AMZN) are all testing delivery drones on a wide scale. Given the rapid proliferation of drones, adding drone maker stocks to your portfolio is a good idea. Here are three of the top names in the sector.
Kratos Defense & Security Solutions (KTOS)
Kratos (NASDAQ:KTOS) “provides mission-critical unmanned aerial systems products, services and solutions for U.S. military defense and national security companies,” U.S. News & World Report noted recently.
The firm’s top line jumped 20% last quarter versus the same period a year earlier to $274.6 million, while its EBITDA, excluding certain items, came in at $5.4 million, up from $2.1 million in Q3 2022.
Very importantly and impressively, Kratos recently received a deal worth up to $579 million to work on command-and-control systems for Space Force’s satellites.
When it comes to drones, the Pentagon bought two of Kratos’ advanced jet drones for a total of $15.5 million in January. Those drones possess “sensor and weapon system payloads to accomplish the penetrating affordable autonomous collaborative killer” mission.
Now, the Air Force is looking to shell out $5.8 billion over five years to buy similar drones. I think there’s an excellent chance Kratos will get all or a big part of those funds.
Finally, on its Q3 earnings call, Kratos indicated it was in advanced talks with another U.S. agency interested in buying its advanced drones and a number of its less high-tech drones.
Given the great interest the U.S. has shown in the company’s products, it is one of the top drone maker stocks to buy.
AeroVironment (AVAV)
AeroVironment’s (NASDAQ:AVAV) Switchblade 600 tactical missile system is becoming popular with multiple armed forces. The system “has a 24-mile range and can stay aloft for 40 minutes as the operator seeks a target for its armor-piercing warhead,” Investor’s Business Daily explained in November.
Israel reportedly asked the U.S. for 200 of the drones, a deal that investment bank William Blair estimated could be worth $40 million.
The company, which also markets “intelligence, surveillance and reconnaissance drones,” made multiple deals with the U.S. and Ukrainian militaries.
Investment bank William Blair estimated the company could ultimately generate “several billion dollars” by supplying the U.S. Army “with lethal unmanned systems” to arm troops.
Elbit Systems (ESLT)
Israel-based Elbit Systems (NASDAQ:ESLT) has a thriving drone business. A unit of the Israeli army is using Elbit’s Skylark drones in Gaza to gather information about Hamas and the surrounding area.
ESLT is also earning significant revenue by selling drones to European countries. In September, the company announced it obtained a $95 million deal “to supply SkyStriker loitering munitions to a European country.”
On Dec. 18, the firm reported, that “since the beginning” of the Israel-Hamas War, it obtained “a series of contracts by the Israel Ministry of Defense (IMOD) in an aggregate amount that is material to the company. “
Given the large scale of Israel’s warfare in Gaza, the high importance of the conflict for the country and the large amount of funds that Israel spends on its defense, I think investors are likely underestimating the amount of additional revenue Elbit will receive as a result of the conflict.
ESLT stock has hardly changed since the war started.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.