The unmanned aerial systems (UAS) industry is entering "a multi-year supercycle" and Red Cat Holdings Inc (NASDAQ:RCAT) is "uniquely positioned" to benefit from accelerating demand for defense-grade small ISR drones, according to Needham.
The Red Cat Holdings Analyst: Analyst Austin Bohlig initiated coverage with a Buy rating and a price target of $17.
The Red Cat Holdings Thesis: The company's biggest near-term opportunity is the U.S. Army's Short Range Reconnaissance Tranche 2 (SRR2) program, Bohligsaid in the initiation note.
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The momentum could accelerate into an opportunity of more than $200 million over the next two years, he added.
Given Red Cat Holdings' broader UAS portfolio and expansion into unmanned surface vehicles, the company is at the center of the $15 billion U.S. defense spending cycle on next-gen unmanned solutions, the analyst stated.
"We see multi-year tailwinds from SRR2, accelerating domestic and international defense spend and new domain expansion driving significant growth," he further wrote.
RCAT Price Action: Red Cat Holdings shares were up 18.84% at $13.69 at the time of publication on Friday. The stock is approaching its 52-week high of $15.27, according to Benzinga Pro data.
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