3 Drone Stocks Take Flight on Hegesth's Bold Memo: Who and Why

Core Insights - The U.S. Department of Defense (DoD) memo titled "Unleashing U.S. Military Drone Dominance" indicates a significant shift towards increasing drone production and usage, particularly small drones, which is expected to benefit various drone manufacturers [1][2][3] Group 1: Red Cat (RCAT) - Red Cat's stock surged over 26% on July 11 and an additional 20% on July 14 following the memo's release, indicating strong market confidence in the company's future prospects [3] - The memo states that small drones will now be classified as consumable commodities, allowing soldiers to utilize them without concerns about their destruction, which could lead to increased sales for Red Cat [2] - Red Cat recorded approximately $16.5 million in sales over the last 12 months, presenting a significant growth opportunity as the U.S. Army adopts its Black Widow drone for reconnaissance [3] Group 2: Kratos Defense & Security Solutions (KTOS) - Kratos Defense's shares rose nearly 12% on July 11, benefiting from the memo's focus on low-cost drone technology, aligning with Kratos' strategy of affordability [5][6] - The XQ-58A drone, developed by Kratos, currently costs between $4 million and $6 million, significantly cheaper than manned jets, with plans to reduce costs to around $2 million through increased production [7] - Kratos is forecasting between $240 million and $250 million in target drone revenue in 2025, which could see a substantial increase in orders due to the memo's emphasis on military training with drones [8] Group 3: AeroVironment (AVAV) - AeroVironment's stock gained 11% on July 11, reflecting positive market sentiment towards the company's diverse drone offerings, even though only some products will shift to the consumable classification [10] - The overall push for expanded U.S. military drone adoption is expected to benefit AeroVironment, contributing to the growth of the drone industry [10] Group 4: Industry Outlook - The memo suggests a more favorable stance on drone warfare under the current administration, indicating that the overall market for drone technology will expand, benefiting multiple players in the industry [11]