In the wake of Ondas’ (ONDS) recent, encouraging deals, its needle-moving acquisitions, and its helpful board appointments, I believe that ONDS stock has become much more attractive. Consequently, I recommend that some investors consider buying ONDS stock at this point.
Deals Leave ONDS Poised to Become a Major Player in the Defense Space
In my previous column on ONDS, published in August, I wrote that the firm had “very promising technology,” but I noted that it was “just starting out in the defense market.”
Ondas’ recently announced deals, however, indicate that European countries are beginning to entrust the firm with critical missions. Moreover, these contracts’ significant price tags and scope provide evidence of the importance of these assignments.
For example, on November 17, the company announced that it had obtained a contract worth about $8.2 million “from a major European security agency to deploy multiple….counter-(drone) systems for the protection of one of the largest international airports in Europe.”
Ondas noted that hostile drones have recently forced a number of European flights to be delayed. Since drones now constitute a significant threat to European airports, the decision by one of the continent’s countries to entrust Ondas with countering this risk indicates that the nation views the company’s technology as reliable and effective. As a result of this validation of the firm’s counter-drone offering, I expect other nations in Europe and elsewhere to adopt this view and sign similar deals with Ondas.
In another deal that makes me more confident in the company’s ability to obtain additional, major contracts from governments going forward, the firm disclosed on December 3 that it had been chosen to “architect, develop, and integrate a full-scale drone-based autonomous border-protection system.”
An Acquisition and an Investment Should Lead to More Contracts
On November 25, Ondas disclosed that it had agreed to buy Israel-based Robo-Team Holdings. Ondas describes Roboteam as a “developer of rugged tactical unmanned ground vehicles (UGVs) used for explosives ordinance disposal (EOD), intelligence, surveillance, and reconnaissance (ISR), hazardous-environment missions, and commercial applications.” Very importantly, the company’s “ground robots,” which are known for their “ruggedness,” “have been deployed extensively by Tier-1 defense and security customers including the U.S. Department of War, the U.S. Marine Corps, and the Israeli Ministry of Defense,” Ondas reported.
Roboteam’s extensive contacts in the U.S. and Israel should significantly enhance Ondas’ ability to sell its own products to the governments of those countries, and Ondas should be able to successfully market Roboteam’s robots to its customers in Europe. Further, Roboteam’s technology, which Ondas describes as “AI-enabled” should enhance the quality of Ondas’ products.
Meanwhile, Ondas on November 20 announced that it had agreed to invest $35 million in Performance Drone Works (PDW), a drone manufacturer that has a large factory in Alabama capable of producing 100,000 drones annually. The investment should enable Ondas to order a large number of drones from PDW at a relatively low cost, enabling ONDS to affordably meet the demand from its customers and charge more competitive prices while keeping its gross margins at their current levels.
New Board Members Should Help Ondas
Ondas announced on November 10 that it had added Israeli Maj. Gen. (Ret.) Yoav Har-Even, former President & CEO of Rafael Advanced Defense Systems, to its board. Rafael is a huge Israeli, government-owned high tech weapons maker whose customers include the Israeli government and many other countries, including 20 NATO members. Consequently, it’s very likely that Har-Even has many contacts in the Israeli government and in a multitude of other governments whom he can help convince to buy Ondas’ products.
Similarly, Ondas, which markets a railroad communications system, disclosed on December 2 that a long-time senior railroad executive, Brent Laing, had joined its board. Also noteworthy is that Laing “currently serves on the Board of Governors of the American Railway Engineering and Maintenance-of-Way Association (AREMA), which maintains the industry’s engineering standards,” according to Ondas. Laing’s influence should enable Ondas to obtain more deals with railroads going forward.
Valuation and the Bottom Line on ONDS Stock
ONDS is changing hands at a huge forward price-sales ratio of 30.8 times. Still, I believe that, given the firm’s tremendous, potential positive catalysts and huge opportunities in the counter-drone and robotic spaces, that its financial results will eventually justify a much higher market capitalization, enabling ONS stock to climb a great deal in the longer term.
However, the shares do pose considerable risk and could drop sharply if the company doesn’t execute well in the near-to-medium term.
Consequently, the name is best suited for long-term growth investors with a high tolerance for risk.
*This article is intended to be informational only; it is not financial advice.
