AI software maker Palladyne (PDYN) has accomplished multiple, impressive milestones recently that should leave the company well-positioned to succeed over the longer term. And importantly, the firm’s technology has been validated to some extent by the U.S. Air Force, meaningfully reducing the risk posed by the shares.
Further, the stock’s current value, as expressed by its market capitalization, may be quite low, given the firm’s tremendous accomplishments and its huge potential.
PDYN’s Recent Achievements
On January 15, Palladyne, along with its partner, drone technology firm Red Cat (RCAT), disclosed that drones equipped with PDYN’s Pilot AI software platform had autonomously cooperated with each other. They also passed “multi modal sensor information” among each other.
According to Red Cat’s Chief Revenue Officer, Geoff Hitchcock, the companies’ innovations “will dramatically improve (drones’) situational awareness in the field” while also allowing a single person to fairly easily oversee multiple drones, even “in operational environments with limited connectivity.”
Because Palladyne’s software apparently has the ability to meaningfully increase drones’ ability to work with each other while reducing the number of humans needed to manage them, the product will likely make drones both more effective and cheaper to operate. These traits are likely to make the company’s software, which is due to be released commercially at the end of the current calendar quarter, rather popular among militaries and drone makers.
And on December 23, Palladyne reported that its software platform had allowed a “small drone….to identify and prioritize terrestrial targets” and subsequently “ follow the prioritized target autonomously.” Although large, drones that cost at least $2 million had been able to perform such tasks previously, smaller, more affordable drones had never been able to do so, according to Palladyne.
Many militaries around the world will likely be very interested in enabling their small, inexpensive drones to find and follow targets on their own for the first time. That’s because this trait could probably enable these armed forces to save a great deal of money by substituting many cheaper drones for a high number of expensive models. What’s more, many companies that make small drones will probably be interested in licensing PDYN’s software in order to make their products much more valuable.
Some Validation by the Air Force
Palladyne was able to finish the first phase of a $13.8 million dollar deal with the U.S. Air Force, and the parties planned to move onto the second part of the deal, PDYN announced in October. Additionally, Shane Groves, who works on Robotics and Automation at Warner Robins, the Air Force base where the company’s software is being tested, was full of praise for the product.
“The Palladyne AI software is a transformational technology that will benefit both commercial and Department of Defense (DoD) industrial and maintenance automation advancements. The software has successfully shown the ability to autonomously prepare contoured surfaces using sanding and media blasting techniques and has delivered high-value to our repair and maintenance operations in a short amount of time,” Groves reported.
The company’s ability to complete the first phase of its deal with the Air Force and Groves’ high praise for its software partially validates the adeptness of its technology. Additionally, the fact that the software has enabled autonomous sanding and media blasting shows that it has potential applications far beyond drones.
A Low Valuation in Light of Its Potential
Palladyne’s current market capitalization is around $300 million Given the tremendous potential of its software to revolutionize drones and the huge demand that could emerge for the product, I believe this valuation is quite low. Underlining that point, ServiceNow (NOW), whose automation software is very popular among many companies, has a market capitalization of $208 billion.
