announced its new product line, unmanned surface vessels (USVs), in partnership with , a company with extensive experience in the space, reported Michael Latimore, Northland Capital Markets analyst, in a May 15 research note.
"USVs are basically drones on the water and can provide surveillance and strike capacity for maritime groups, just as aerial drones can do for land-based warfighters," Latimore explained.
On the news, Northland Capital reiterated its US$13 per share price target on the drone tech company, trading at the time of the report at about US$6.65 per share, noted Latimore.
The target implies a potential return of 95%.
Red Cat remains rated Outperform.
Red Cat will be responsible for the USVs' physical elements, such as the hull, mold, jet propulsion, plugs and metallic radar reflective coating and will build the vessels, in the U.S. The company will mount Black Widows on them and potentially third-party weapons as well. Red Cat expects to start producing these sea-based drones in Q3/25. Palantir likely will provide the software, artificial intelligence and system intelligence for them.
What's more, Latimore noted, "We believe the partners bid on a large project, which could be in the US$100 million-plus (US$100M-plus) range."
Red Cat's reiterated 2025 revenue guidance is US$80–120M, reported the analyst. Of this, the company expects US$25–65M to come from the SRR program, US$25M from non-SRR Black Widow, US$25M from Edge 130 and US$5M from FANG.
Red Cat's Q1/25 revenue was US$1.6M, below Northland Capital's US$2M estimate, noted Latimore. Adjusted EBITDA was (US$10.3M), also missing Northland's forecast, of (US$8.4M). Red Cat ended Q1/25 with US$7.7M in cash (and since, raised US$30M).
"Q1/25 results were slightly light but a small portion of year guidance," Latimore wrote.
The analyst reported that Red Cat is confident in its guidance for several reasons. They are indicators of a shift toward small, autonomous drones, the company's non-SRR customers (including border patrol, first responders, Air Force, Australia and Canada) and the anticipated LRIP (low rate initial production) contract Red CAT expects to receive any day now. It got the LRIP service contract, related to packaging and shipping, that usually immediately precedes the larger production contract. The company's backlog is valued now at US$10M.
The low end of revenue guidance assumes Red Cat recognizes US$25M, largely from the LRIP contract, whereas the upper end assumes production is underway at maximum capacity in Q4/25.
The drone tech company is doubling manufacturing capacity for Black Widow, to 1,000 per month eventually, which would generate US$200M-plus per year. Also, it is moving Edge 130 production to a larger site where yield of 150 per month is possible; this would generate US$80M-plus annually.
According to Latimore, Red Cat has "myriad potential catalysts." The key ones are the final LRIP production contract, a USV contract, a full rate production contract, more funds for drones in 2025, finalization of Palantir software sales and EBITDA positivity.
Latimore reported that Red Cat has 90.5 million shares outstanding and 79.7% float. It has a market cap of US$602M and a 52-week range of US$0.80–15.27 per share.
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Risks to the achievement of price target An ability to execute in a high-growth environment; competition; government spending patterns and political influences; timing of hardware orders relative to quarter ends; supply chain management; tariff influences on COGS; a light balance sheet. Analyst Certification I, Michael Latimore, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. Important disclosures
Explanation of Ratings: Outperform (BUY) – Outperform the S&P 500 by at least 10%. Market Perform (HOLD) – Perform within 10% above or below the S&P 500. Underperform (SELL) – Underperform the S&P 500 by at least 10%. Rating Distribution Breakdown as of 05/15/2025 IB Serv./ Past 12Mos. Rating Category Count Percent Count Percent Buy [OP] 158 80.61% 27 17.09% Hold [MP] 38 19.39% 2 5.26% Sell [UP] 0 0.00% 0 0.00% Important Disclosure: The analyst responsible for preparing this research report receives compensation that is based upon various factors including Northland's institutional trading commissions and total revenues which may be generated by Northland's investment banking activities. Northland Securities makes a market in the subject company's security: RCAT Northland Securities intends to seek compensation for investment banking services from the subject company in the next three months: RCAT
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