The Pentagon is sending strong signals that it is impressed by Palladyne’s (PDYN) AI software, and large investors have sharply ramped up their purchases of PDYN stock. Meanwhile, multiple, important, new developments should push the stock higher in the medium term.
And if, as appears to be possible, Palladyne’s autonomous systems do turn out to be game changers for militaries and large companies, PDYN stock remains tremendously undervalued.
The Defense Department May Have Big Plans for Palladyne
As I noted in a previous column, Palladyne’s drones, according to the firm, have shown the ability to “autonomously (cooperate) with each other” and provide “information” to each other. And I pointed out that the company’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.” In light of these attributes, “militaries and drone makers” are likely to be very interested in the aircraft, I predicted.
A recent report indicates that the U.S. military may indeed be interested in utilizing the company’s software for drones. Specifically, UK-based Shephard Group, a UK-based defense news outlet which has been in business since 1981, reported last month that PDYN and its partner, Red Cat (RCAT), would “demonstrate” their autonomous drones to Pentagon officials. In light of the latter report, I think the Defense Department could be considering purchasing the drones, which were built by Red Cat and have been equipped with PDYN’s Palladyne Pilot AI software.
And since the drones, according to Palladyne, can communicate with each other and autonomously carry out Intelligence, Surveillance and Reconnaissance (ISR) missions, it could make the Pentagon interested in buying many of them. The aircraft could be attractive to the Defense Department because of their ability to reduce the number of people needed to conduct such missions.
The agency also seems pleased with Palladyne’s other major endeavor: Providing AI for robots. On June 11, Palladyne announced that the Pentagon had provided it with additional funds in order to further the testing of the company’s AI software by the Air Force. So far, the tests have involved “media blasting” and “sanding” by robots equipped with Palladyne’s autonomy-enabling software, the company noted.
The additional funding indicates that the Pentagon is pleased with the performance of Palladyne’s software and suggests that it may plan to utilize the system on a significant scale over the long term. After all, why would the agency waste its time and its increasingly precious funds on Palladyne’s system unless it thinks that the product works well and can be helpful to the military?
Massive Buying by Large Investors and Important New Developments
Many major investors, including large banks, increased their holdings of PDYN by large amounts last quarter. Overall, 2.2 million shares of the company were bought in recent quarters, and only 678,000 of them were sold.
In Q1, Blackrock increased its holdings of the name by 50% to nearly 676,000 shares, while UBS’ total shares surged by 400% to more than 328,000. Finally, Goldman Sachs’ holdings jumped by 507% to 96,400.
The data indicates that large investors are generally becoming more confident in the company’s outlook.
On the news front, Palladyne and Red Cat announced in May that Palladyne’s software had enabled autonomous collaboration among three different types of drones for the first time.
Further, on June 2, PDYN disclosed that its shares had been added to the Russell 3000 and Russell 2000 indexes. Since institutional investors often buy indexes through ETFs and some investors may only buy the shares of companies that are in these indexes, the development should boost the shares in the short-to-medium term.
Additionally, the company has said that it plans to start selling its product to companies this year, so it may soon announce needle-moving new licensing deals with firms.
And finally, PDYN on February 18 announced that Michael Young, who led Caterpillar’s (CAT) investment arm from 2015 to 2023, had joined Palladyne’s board of directors. This development could lead to investments by CAT, one of the world’s largest makers of construction equipment, in Palladyne or major licensing deals between the software maker and Caterpillar. Another possibility is that one or more of the companies in which Caterpillar invested could license Palladyne’s software.
Palladyne Is Potentially Hugely Undervalued
As I noted in my last article, “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.” Further, according to the company, its software is much easier to program and utilize than competing tools, while it enables robots to learn and perform tasks meaningfully more effectively than other systems.
Assuming that the firm’s assertions are correct and that its software has no major problems, there’s an excellent chance that the product could become very widely used to power robots globally.
Of course, if Palladyne’s software is installed in hundreds of thousands of robots and tens of thousands of drones, the company’s current market capitalization of $300 million will prove to be extremely low. Consequently, there a good chance that the company’s share price will climb dramatically over the long term.
*This article is intended to be informational only; it is not financial advice.
