ONDS, UMAC, KTOS, RCAT: Trump’s Drone Bet Has Retail Piling – But One Stock Stands Out With 70% Upside Potential

• Drone stocks surged after a report said the Trump administration is exploring funding deals to boost domestic drone manufacturing and lower costs.
• UMAC led the rally after being named among companies under consideration for potential Pentagon funding.
• ONDS jumped despite the approval of an increase in authorized incentive-plan shares.

Trump's drone push has investors scrambling for exposure. Shares of Ondas Holdings (ONDAS), Unusual Machines (UMAC), Kratos Defense & Security Solutions (KTOS) and Red Cat Holdings (RCAT) surged after reports that the Pentagon is exploring funding deals with drone manufacturers, but Wall Street sees one stock offering significantly more upside than the rest.

On Thursday, UMAC was up 57%, RCAT rose 33%, ONDS surged 23%, AeroVironment (AVAV) up 18%, Swarmer (SWRM) advanced 17% and KTOS climbed 14%. The rally added to an already strong month for the sector, with UMAC up 104% in May, ONDS gaining 25%, RCAT rising 26%, and KTOS advancing 6%.

Why Drone Stocks Soared

The Trump administration is exploring funding arrangements with drone companies to expand domestic manufacturing capacity and lower costs, The Wall Street Journal reported on Thursday. The discussions, involving the Pentagon and the Office of Strategic Capital, could reportedly include a mix of loans, debt financing and equity investments, with companies such as Performance Drone Works, Unusual Machines and Neros Technologies reportedly under consideration. 

The effort aligns with the Pentagon's $1.1 billion Drone Dominance initiative, which aims to deploy 300,000 low-cost attack drones by 2027, and also comes as conflicts in Ukraine and the Middle East underscore the growing importance of autonomous systems in modern warfare. 

Wall Street's Top Drone Pick

While UMAC gained the most on Thursday, analyst targets suggest that the biggest potential winner may be a different drone player. According to Koyfin data, KTOS offers the largest implied upside among the group with an average price target of $113.05, representing a 73% upside from current levels. The stock also carries a 'Strong Buy' consensus rating from 19 analysts, including 12 'Buy' ratings and four 'Hold' ratings.

ONDS ranks second with an average target price of $20.31, implying a 53% upside from its last close. The stock carries a 'Strong Buy' consensus rating, supported by six 'Buy' ratings and two 'Strong Buy' ratings.

RCAT follows closely behind with implied upside of 51%. Analysts covering the company also maintain a 'Strong Buy' consensus rating, with four 'Buy' ratings and one 'Strong Buy' rating. AeroVironment offers 45% upside based on analyst targets, while Draganfly (DPRO) carries an implied upside of 22%.

UMAC is the outlier. Despite Thursday's massive rally, the stock currently trades above its average analyst target of $25.33, implying a 14% downside from current levels. However, analysts continue to maintain a 'Strong Buy' consensus rating, driven by four 'Buy' ratings and two 'Strong Buy' ratings.

UMAC's Pentagon Tailwind

Unusual Machines emerged as the biggest winner after being directly named among companies under consideration for potential Pentagon support. The company supplies NDAA-compliant drone components, including FPV goggles, motors, frames and electronic systems used across hobbyist, commercial and military markets. 

It currently holds a U.S. Army contract supplying 3,500 drone motors and related components to the 101st Airborne Division's Attritable Battlefield Enabler program, with the potential for future expansion. Investor enthusiasm was further fueled by the company's connection to Donald Trump Jr., who serves as both an investor and advisory board member.

Earlier this week, Unusual Machines announced that partner Powerus had advanced to Phase II of the Pentagon's $1 billion Drone Dominance program with its MatrixFold drone platform, which the company described as a low-cost, rapidly deployable drone manufactured in the U.S. The stock has now gained approximately 483% over the past year, making it one of the strongest performers in the defense tech sector. 

RCAT, KTOS Ride Drone Momentum

Red Cat Holdings also attracted significant investor interest. The company develops tactical reconnaissance drones, including its Black Widow and Teal platforms, meant for intelligence, surveillance and reconnaissance missions. Red Cat was selected for the U.S. Army's Short Range Reconnaissance Program of Record and supplies affordable, AI-enabled battlefield drones.

Kratos joined Thursday's rally as investors looked beyond small tactical drones and toward larger autonomous combat systems. The company's XQ-58A Valkyrie has become one of the most closely watched "loyal wingman" programs that operates alongside manned fighter aircraft. Kratos has also benefited from increasing Pentagon interest in affordable autonomous combat aircraft and next-gen battlefield systems.

ONDS Defies Dilution Fears

ONDS shares surged the rally as investors focused on its autonomous drone systems, counter-UAS technologies, AI software and defense communications infrastructure. Recent developments include a $15.8 million initial order for a larger demining program in Israel, classified defense contracts in the Asia-Pacific region and the acquisition of Mistral, which expanded Ondas' access to over $1 billion of existing Department of Defense contract vehicles.

Investors also appeared to overlook dilution concerns. At its annual shareholder meeting on May 28, Ondas received approval to increase shares authorized under its stock incentive plan from 61 million to 81 million shares. The company subsequently registered the additional 20 million shares and disclosed 1.25 million shares as part of restricted stock awards granted to Mistral employees after the acquisition.

How Do Retail Traders Feel About Drone Stocks?

On Stocktwits, retail sentiment for ONDS, RCAT, UMAC, and KTOS was ‘extremely bullish’ amid ‘extremely high’ message volume.

A recent Stocktwits poll highlighted retail investors' preference for ONDS among drone stocks, with 55% of the 1,700 users selecting the company as their top long-term pick over the next five years. UMAC received 18% of the vote, KTOS 14% and AVAV 13%. 

One user said, “how do you not see the better potential with UMAC? Umac will be the supplier for ALL of the others.”

Another user said, “Incredible RCAT is the original And Biggest Contract Winner” 

Over the past year, ONDS has been the standout performer with a gain of 1,138%, followed by UMAC at 483%, RCAT at 131% and KTOS at 75%.

For updates and corrections, email newsroom[at]stocktwits[dot]com.

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