Drone Delivery Canada (Drone Delivery Canada Stock Quote, Chart, News TSXV:FLT) brought home some mixed results in its latest quarter, according to Echelon Capital Markets analyst Rob Goff.
In an update to clients Friday, Goff reiterated his “Speculative Buy” rating but dropped his target price from $1.80 to $1.60, saying the company has a catalyst rich path up ahead.
Toronto-based Drone Delivery Canada has a drone delivery logistics platform and provides depot-to-depot and depot-to-customer delivery services. The company is currently testing its Condor drone, which has an expected range of 200 km and payload capacity of 180 kg and is integrated with the company’s FLYTE software system.
Testing, which has been accelerated due to the COVID-19 pandemic, should be finished in the fourth quarter this year.
Along with the Condor, the company has the Sparrow and Robin XL on which testing is now completed, with all three coming to market soon, according to the company.
“Pre-selling efforts are underway and market response has been very favourable in Canada and internationally,” said Michael Zabra, president and CEO, in a press release.
“We continue to be a leader in the industry with our advanced, proven solution.”
DDC reported second quarter 2020 revenue and EBITDA of $24,000 and negative $2.1 million, which compared to Goff’s estimates at $244,000 and negative $3.4 million, respectively, and the consensus $140,000 and negative $3.0 million, respectively. The revenue for the quarter came from the commercial project with DSV Air & Sea.
Looking back at recent events for DDC, Goff noted that the company has signed and successfully implemented two routes for DSV, signed a contract with Georgina Island First Nation Community, commenced a testing process in the US and closed on a $9.3-million bought deal. The analyst said that COVID-19 has actually opened new verticals for the application of drone delivery —in situations where time is of the essence and reach is difficult— and it has accelerated government approvals as well.
“While we await evidence of commercial traction building in 2021, regulatory approvals, contract wins and international partnerships remain as the key catalysts. We continue to see positive regulatory tailwinds in North America and internationally as COVID-19 represents a catalyst,” Goff wrote.
“We look for positive regulatory approval for the Robin XL and the Condor in Q420 with announced contracts following in the quarter ahead of H121 revenues. The Company currently has three Condors, out of which one is being used for testing and the other two are provisioned. We have revised our full-year forecast to reflect the current project momentum and start-up cost revenue deferrals. We have revised our price target downward by $0.20 to $1.60 with the downward forecast revision on timing considerations,” he said.
After the Q2 results, Goff has reworked his estimates and is now calling for 2020 revenue of $0.6 million (was $3.9 million) and EBITDA of negative $10.8 million (was negative $11.0 million) and for 2021 revenue of $11.0 million (was $17.9 million) and negative $5.5 million (was negative $3.4 million).
At press time, the analyst’s $1.60 target represented a projected 12-month return of 131.9 per cent.
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