Shares of AgEagle Aerial Systems (NYSEMKT:UAVS) rose a quick 18% when trading got underway on April 1. The news driving that price increase actually came on the last day of March, when the company reported quarterly earnings following the close of trading. There was bad news … and good news.
If you look at the bottom line here, AgEagle, which makes aerial drones, had terrible results last year. In fact, the fiscal year 2020 loss of $0.35 per share was up materially from the $0.17 per-share loss it experienced in 2019. That’s just over a 100% increase in red ink, which you would normally expect to worry investors. But the real story here isn’t earnings right now — it’s revenue.
On the top line, AgEagle reported record sales of $1.3 million in 2020. That was up 333% from the $297,000 in revenue it recorded in 2019. That’s great, but what really has investors excited here is its statement that “AgEagle’s significant year-over-year revenue growth was largely attributable to purchase orders to manufacture and assemble drones and related drone delivery products for the Company’s large e-commerce client.” In other words, AgEagle looks like a play on using drones to deliver things that have been purchased online. Investors, excited by the update (and very clear importance of the new business), bid the stock higher.
There are a couple of important takeaways here. First, AgEagle doesn’t actually name the “e-commerce client” that drove revenue sharply higher, which has left investors speculating about who it might be. Second, $1.3 million in sales isn’t a particularly large number despite the material year-over-year increase. Indeed, the company’s market cap is a relatively tiny $400 million or so. Which brings the story to the stock price over the past few months, which has been an absolute roller-coaster ride.
At one point earlier in 2021, the stock was up more than 150%, but it is now up about 20%. Most long-term investors should probably tread with caution, recognizing that this small company with a big boost in sales coming from an unknown client has a very volatile stock. Some conservative types, in fact, might even argue that the quarterly update left more questions than answers.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.