Drone stocks are set to surge with the market forecast to soar at a huge compound annual growth rate of 22% between now and 2032. By the end of that period, the market is expected to be valued at $82.9 billion. Among the factors fueling increases in the demand for drones in recent years is the war in Ukraine, in which both sides are extensively using drones.
According to one estimate, military drones account for 50% of America’s total drone market. The only way to obtain a great deal of exposure to military drones via American stocks is through buying the shares of firms that specialize in making them. But, given the large and rapidly growing extent to which armies are buying and utilizing drones, I believe that these drone stocks will prove to be lucrative for long-term investors.
AeroVironment (AVAV)
The largest seller of drones to America’s military, AeroVironment (NASDAQ:AVAV) also market “suicide drones” that are being used by Ukraine for kamikaze missions against the Russian military. Ukraine is also reportedly utilizing AVAV’s drones for recon.
Unsurprisingly given the large amount of military spending by the U.S. on behalf of Ukraine, AeroVironment delivered excellent Q3 results as its EPS soared 91% versus the same period a year earlier to 63 cents while its revenue jumped 39% year-over-year to $186.6 million.
Moreover, AVAV increased its full-year EPS outlook to $2.69-$2.83 from $2.46-$2.70. Also noteworthy is that the U.S. Department of Defense is currently considering a purchase of AVAV drones.
Kratos Defense & Security Solutions (KTOS)
Kratos (NASDAQ:KTOS) provides a variety of defense products, but specializes in developing extremely high tech military drones. According to Benchmark, KTOS is likley working with GE’s (NYSE:GE) aerospace division to develop a jet engine for military drones.
Meanwhile, in recent weeks, Kratos has been obtaining impressive contracts from the Pentagon left and right.
Most notably, KTOS received a huge deal of up to $579 million from the U.S. Space Force. Additionally, on March 18, the firm received $57 million from the Pentagon. Finally, on March 4, KTOS obtained a $499 million deal to develop “anti-tamper solutions” for the Pentagon.
Northrop Grumman (NOC)
Defense giant Northrop Grumman (NYSE:NOC) has a thriving drone business. Last November, the firm obtained a huge $11.5 billion deal to provide 65 advanced MQ-4C drones for the U.S. Navy. And even before that contract, the firm had a rather large 20% share of the North American military drone market.
Moreover, the company’s RQ-180 drone reportedly may generate another $100 billion of revenue for the firm.
Meanwhile, NOC’s overall backlog climbed a healthy 7% in 2023 to a hefty $78.7 billion. NOC stock has an attractive forward price-earnings ratio of 19 and a significant dividend yield of 1.9%.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.