A.S.R Nederland offering orders below EUR 56.00/shr risk missing

A.S.R Nederland offering orders below EUR 56.00/shr risk missing

Draganfly (NASDAQ:DPRO), a leading provider of drones, has witnessed a significant surge in stock performance, rising by 77% over the past year. This momentum is driven by increasing demand for defense drones and heightened investor interest in the drone market. However, a closer examination of the company's financials reveals several concerns that may make investment in Draganfly a high-risk proposition.

Draganfly operates within a rapidly growing market, with estimates projecting a 15% annual growth rate, reaching $220 billion by 2032 [1]. The company's product portfolio includes the Commander 3XL, Heavy Lift Drone, and Flex FPV, with a triple redundant autopilot system called Apex. Despite these promising market conditions, Draganfly's financial performance raises concerns.

During the second quarter of 2025, Draganfly generated $2.1 million in revenue, up 22% year-over-year. Gross profit increased to $0.5 million, up 9%, but gross margins declined to 23.9% from 26.6% the previous year. Operating expenses rose to $4.9 million, up 13% year-over-year, driven by higher share-based payments, travel expenses, and office costs. The company's operating cash burn for the first six months was $9.4 million, and its free cash burn was $9.5 million. Despite raising $28.2 million in fresh capital, Draganfly's cash balance stood at $22.6 million, indicating a cash burn rate that funds the company for approximately one year ahead [1].

Analysts note that pure-play drone companies typically trade between 3x and 6x EV/Sales. Draganfly's enterprise value is $86.84 million, and its projected share prices based on sales estimates for 2025 and 2026, along with the recent capital raise, do not present a compelling investment case [1]. Furthermore, the company's valuation appears to be higher than its peers, with other drone-exposed companies like Kratos (KTOS) and AeroVironment (AVAV) trading at substantially lower multiples [1].

Draganfly has identified opportunities for growth, including a $2 billion defense package from Canada to Ukraine. However, the drone and counterdrone portion is $220 million, with no awards yet to Draganfly. The company's previous military aid revenues for Ukraine were not disclosed, and there is no indication that these revenues have significantly driven sales [1].

In conclusion, while Draganfly operates within a promising market, its current financial performance and valuation raise significant concerns. The company's inability to scale revenues at a near-constant operating expense level, its cash burn rate, and its higher valuation compared to peers make investment in Draganfly a high-risk proposition. Investors should approach this stock with caution.

References:
[1] https://seekingalpha.com/article/4818494-draganfly-too-much-risk-in-drone-market