There’s a lot still up in the air when it comes to commercializing drone delivery and with more and more players buzzing around the market, the choice is a tough one for investors looking to get exposure to the space. So says portfolio manager Bruce Murray, who argues you might want to take a flyer on a name like Drone Delivery Canada (Drone Delivery Canada Stock Quote, Chart, News, Analysts, Financials TSXV:FLT) but there’s plenty of risk involved.
“Drone delivery is in its infancy and there are a tonne of little companies starting up and competing,” says Murray, CEO of the Murray Wealth Group, who spoke on BNN Bloomberg on Thursday. “One or two will succeed, many will fail and I expect the winners will be snapped up by the major aerospace companies.”
Drone logistics company Drone Delivery Canada saw its share price spike earlier this year, taking the stock from sub-$1.00 territory to above $2.20 by early February. The stock has dropped since, however, and looks to be settling into the $1.20 range, still in the black for the year but likely leaving investors wondering what exactly caused the up and down for FLT.
Part of the reason for the updraft might have been a number of announcements coming in late last year concerning successful testing for Drone Delivery as well as a number of LOIs, including one assisted by Air Canada for a multi-year, multi-route project in Quebec for FLT’s Condor drone with Quebec parcel delivery company Drones Express.
“Market response to our pre-selling of the Condor solution has been favourable in Canada and internationally and we are excited to announce our first potential Condor project,” said Michael Zahra, President & CEO of DDC, in a November 24 press release.
“This is a pivotal milestone for us. We are pleased to be working with Drones Express on this innovative commercial opportunity to service the needs of rural communities in Quebec, with potential further network growth in the future,” Zahra said.
Zahra has said FLT’s rise in January and February could also be COVID-19-related, with investors looking for corners of the market supporting pandemic-friendly tech.
“As much as it’s obviously something that we all wish globally didn’t happen, [the pandemic] raised the profile on the industry overall and raise the profile of Drone Delivery Canada, as well, because there have been a number of use cases, mostly healthcare related, of course, specific to drone delivery and specific to the pandemic and we ended up working on a few projects,” Zahra said in an April 21 interview with media outlet Proactive.
“So I think overall there was a heightened awareness of the drone industry. And then second of all I think there was a lot of movement in tech in general,” Zahra said.
The drone tech field is growing, populated now by major logistics and delivery players like Amazon, FedEx and UPS as well as smaller companies like AgEagle Aerial Systems and FLT. There’s also Google parent company Alphabet’s project Wing, which has made a number of press-friendly events over the years including delivering Girl Guide cookies last year by drone to a community in Virginia along with establishing partnerships in Finland and Australia.
Murray said for investors, choosing the winner won’t be easy, however.
“If you pick the right company… And remember you’re competing globally with this and there are two or three companies in Canada trying to do it,” he said. “It’s speculative in nature so be prepared to gamble.”
“I think if you feel comfortable with Drone Delivery Canada, go ahead, but it is speculation, it-s not an investment at this stage,” Murray said.
Drone Delivery Canada on Thursday announced a new program in partnership with the University of British Columbia to deploy the company’s Sparrow drone to transport cargo to the Stellat’en First Nation in the Fraser Lake area of Central Northern BC. Expected to be up and running by the second half of this year, the project will see health care supplies including COVID-19-related PPE, testing and diagnostics delivered to the isolated community.
“We are pleased that UBC has chosen Drone Delivery Canada as part of their ‘Remote Communities Drone Transportation Initiative’ at the Stellat’en First Nation,” said Zahra in a press release. “The UBC Faculty of Medicine is a recognized global leader and we applaud their initiative to embrace drone delivery to benefit First Nations communities.”
Also this month, Drone Delivery Canada announced a new patent awarded by the US Patent Office for the company’s proprietary, portable emergency or medical package for remote communication on package deliveries.
Meanwhile, DDC announced in March further successful testing results from its largest drone, the Condor, which has a range of 200 km and a payload capacity of 180 kg.