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Red Cat Holdings Inc (RCAT)
NASDAQ:RCAT
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Red Cat Holdings
(NASDAQ:RCAT)
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Rating:53Neutral
Price Target:
$17.00
▲(0.00% Upside)
Action:ReiteratedDate:03/10/26
The score is held back primarily by weak financial performance (persistent losses, negative margins and cash flows) despite strong revenue growth and low leverage. Technicals are notably supportive with a clear uptrend and positive momentum, while valuation is constrained by a negative P/E and no dividend yield data.
Positive Factors
Sustained Revenue Growth
A 75% TTM revenue increase reflects durable demand for Red Cat's UAS products and services. Sustained top-line expansion supports scale advantages, enables continued investment in product development and go-to-market, and increases the potential to convert higher-margin software/subscription sales over time.
Diverse Hardware + Software + Services Model
A business mix of hardware, recurring software subscriptions (TRICHON) and services creates multiple revenue levers. This blended model supports sticky customer relationships, recurring revenue potential, and higher lifetime value from defense/commercial clients, improving resilience across cycles.
Low Financial Leverage
Low leverage provides financial flexibility to fund R&D, contract execution, and working capital without heavy interest burden. Manageable debt reduces bankruptcy risk and preserves capacity to raise incremental capital or pursue strategic partnerships while navigating the path to profitability.
Negative Factors
Persistent Unprofitability
Widespread negative margins across gross, operating and EBITDA levels indicate structural profitability issues. Until unit economics improve or mix shifts to higher-margin software/services, the company risks continued cash burn and an inability to convert revenue growth into sustainable profits.
Negative Operating and Free Cash Flow
Ongoing negative operating and free cash flow constrains reinvestment and requires external financing to fund operations and growth. Even with improvement in FCF growth, persistent cash outflows create execution risk for scaling software deployment and fulfilling defense contracts without dilutive capital raises.
Weak Returns on Equity
A negative ROE signals the business is not generating acceptable returns for shareholders and may face dilution pressure if new equity is issued. Structural inability to convert invested capital into profits undermines long-term shareholder value creation absent a clear path to margin recovery.
Red Cat Holdings (RCAT) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$2.03B
Dividend YieldN/A
Average Volume (3M)15.73M
Price to Earnings (P/E)―
Beta (1Y)1.26
Revenue GrowthN/A
EPS GrowthN/A
CountryUS
Employees115
SectorIndustrials
Sector Strength72
IndustryComputer Hardware
Share Statistics
EPS (TTM)-0.17
Shares Outstanding119,371,140
10 Day Avg. Volume26,482,679
30 Day Avg. Volume15,733,141
Financial Highlights & Ratios
PEG Ratio-0.05
Price to Book (P/B)7.66
Price to Sales (P/S)52.80
P/FCF Ratio-18.56
Enterprise Value/Market Cap0.59
Enterprise Value/Revenue82.96
Enterprise Value/Gross Profit7.42K
Enterprise Value/Ebitda-29.33
Forecast
1Y Price Target
$20.67Price Target Upside21.59% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering3
EPS Forecast (FY)-0.38
Revenue Forecast (FY)$142.72M
Red Cat Holdings Business Overview & Revenue Model
Company DescriptionRed Cat Holdings, Inc., through its subsidiaries, provides various products, services, and solutions to the drone industry. It offers commercial and government unmanned aerial vehicle technology for reconnaissance, public safety, and inspection applications. The company also provides First Person View (FPV) video goggles; and software and hardware solutions that enable drones to complete inspection services in locations where global positioning systems are not available. In addition, it is involved in the sales of FPV drones and equipment primarily to the consumer marketplace. Red Cat Holdings, Inc.is based in San Juan, Puerto Rico.
How the Company Makes MoneyRed Cat generates revenue primarily by selling drone hardware and related services/software. Key revenue streams include: (1) UAS product sales: sales of small drones (including the Black Widow family) and associated components/accessories to customers such as government/defense agencies and commercial operators; (2) software and subscriptions: revenue tied to its TRICHON drone operations platform, which is used for fleet management, flight logging, compliance, and operational analytics (where deployed as subscription or software/service contracts); and (3) services and support: training, maintenance, and other customer support services associated with deployed systems. A significant driver of earnings can be contract awards and purchases by U.S. government/defense customers and prime contractors; specific customer names, contract sizes, margins, and the split between hardware vs. software/services are null.
Red Cat Holdings Earnings Call Summary
Earnings Call Date:Nov 13, 2025
(Q3-2025)
| % Change Since: |
Next Earnings Date:Sep 22, 2026
Earnings Call Sentiment Neutral
The earnings call highlighted significant operational advancements such as the launch of the Long Beach factory and strategic partnerships like Palantir, suggesting positive growth prospects. However, there are uncertainties around financials due to CFO transition and additional funding, creating a mixed outlook.Q3-2025 Updates
Positive Updates
Long Beach Facility Launch
The Long Beach factory is operational and shipped its first drones in March, with expectations for monthly shipments as the facility scales and backlog is resolved.
Black Widow Competitive Advantage
Vehicle navigation for the Black Widow is almost complete, providing a unique competitive edge and expected to expand margins. Flight data and tests are promising.
Partnership with Palantir
Red Cat is partnering with Palantir for digital navigation, a critical software feature not yet included in guidance, expected to significantly enhance drone capabilities.
Potential Increase in LRIP
The Low Rate Initial Production (LRIP) is anticipated to be higher than previously reported, with additional contracts expected this year.
Negative Updates
Delayed CFO Involvement
Chris Erickson, the newly hired CFO, was not involved in the 10-K signing due to the timing of his employment, necessitating a brief earnings call.
Uncertainty in Additional Funding
There is uncertainty around receiving an additional $100 million in SRR funds for 2025, though the company is prepared to deliver if secured.
Company Guidance
During the conference call on March 31, 2025, Red Cat Holdings provided several key updates and forward-looking statements. Jeff Thompson, the CEO, announced that the company's Long Beach facility is operational and shipped its first drones in March, with plans to increase production monthly. The Black Widow drone has nearly completed its vehicle navigation feature, which is expected to enhance margins. The company has also signed a features contract for the Black Widow under the SIR program and anticipates signing the LRIP contract soon. International opportunities remain strong, particularly in collaboration with NATO allies. Additionally, Red Cat is integrating Palantir's operating system to improve efficiency and margins and expects significant financial impact from the digital navigation software, although this is not yet included in current financial guidance. The company has requested an additional $100 million for 2025 to support expanding drone capabilities, reflecting the growing importance of drones in modern warfare. A more detailed update is anticipated at an upcoming Investor Day Town Hall.Red Cat Holdings Financial Statement Overview
Summary
Strong TTM revenue growth (+75%) is outweighed by weak fundamentals: negative gross/net/EBIT/EBITDA margins, a deeply negative net margin (-6.79%), negative ROE, and negative operating and free cash flow despite some improvement in free cash flow growth. Low leverage (debt-to-equity 0.23) is a partial offset but does not resolve ongoing losses.Income Statement
Red Cat Holdings shows significant revenue growth with a 75% increase in the TTM period. However, the company struggles with profitability, as indicated by negative gross, net, EBIT, and EBITDA margins. The net profit margin is particularly concerning at -6.79%, reflecting substantial losses.30
Negative
Balance Sheet
The company's debt-to-equity ratio is relatively low at 0.23, suggesting manageable leverage. However, the return on equity is negative, indicating that the company is not generating profit from its equity base. The equity ratio is not provided, but the overall financial stability appears weak due to consistent losses.40
Negative
Cash Flow
The cash flow analysis reveals a negative operating cash flow and free cash flow, although there is a notable improvement in free cash flow growth. The free cash flow to net income ratio is slightly above 1, indicating that cash flow is somewhat aligned with net income, but the overall cash flow position remains challenging.35
Negative
| Breakdown | TTM | Jun 2025 | Jul 2024 | Apr 2023 | Apr 2022 | Jul 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 14.49M | 7.28M | 17.84M | 4.62M | 6.43M | 5.00M |
| Gross Profit | 162.15K | -2.03M | 3.68M | -834.31K | 925.51K | 1.07M |
| EBITDA | -41.00M | -36.50M | -16.04M | -22.54M | -11.28M | -11.98M |
| Net Income | -52.42M | -65.42M | -24.05M | -28.11M | -11.69M | -13.24M |
Balance Sheet | ||||||
| Total Assets | 286.02M | 55.60M | 48.54M | 60.74M | 85.08M | 11.69M |
| Cash, Cash Equivalents and Short-Term Investments | 206.43M | 9.15M | 6.07M | 15.99M | 48.88M | 277.35K |
| Total Debt | 22.42M | 3.27M | 2.27M | 2.97M | 3.72M | 2.02M |
| Total Liabilities | 32.75M | 5.48M | 4.97M | 5.98M | 7.16M | 6.43M |
| Stockholders Equity | 253.27M | 50.12M | 43.56M | 54.77M | 77.92M | 5.27M |
Cash Flow | ||||||
| Free Cash Flow | -53.91M | -20.70M | -18.82M | -32.23M | -16.38M | -1.40M |
| Operating Cash Flow | -52.66M | -20.54M | -18.56M | -29.78M | -16.02M | -1.40M |
| Investing Cash Flow | -1.25M | 4.24M | 13.57M | 29.59M | -46.60M | -48.37K |
| Financing Cash Flow | 251.18M | 19.39M | 7.80M | -633.55K | 66.43M | 1.49M |
Red Cat Holdings Technical Analysis
Positive
17.00
Price Trends
13.81
Positive
11.15
Positive
10.40
Positive
Market Momentum
0.91
Negative
53.34
Neutral
55.05
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For RCAT, the sentiment is Positive. The current price of 17 is above the 20-day moving average (MA) of 14.52, above the 50-day MA of 13.81, and above the 200-day MA of 10.40, indicating a bullish trend. The MACD of 0.91 indicates Negative momentum. The RSI at 53.34 is Neutral, neither overbought nor oversold. The STOCH value of 55.05 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for RCAT.
Red Cat Holdings Risk Analysis
Red Cat Holdings disclosed 46 risk factors in its most recent earnings report. Red Cat Holdings reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Red Cat Holdings Peers Comparison
UnderperformOutperform
Sector (63)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | $29.35B | 27.35 | 8.65% | ― | 7.41% | -12.85% | |
63 Neutral | $10.79B | 15.43 | 7.44% | 2.01% | 2.89% | -14.66% | |
53 Neutral | $2.03B | -17.49 | -68.15% | ― | ― | ― | |
53 Neutral | $10.78B | -21.68 | -6.41% | ― | 79.89% | -171.81% | |
51 Neutral | $17.38B | 606.55 | 1.20% | ― | 14.00% | 23.78% | |
48 Neutral | $347.09M | -1.62 | -36.12% | ― | 42.17% | -215.37% | |
45 Neutral | $46.60M | -5.65 | -180.40% | ― | -6.34% | 98.60% |
* Industrials Sector Average
RCAT
Red Cat Holdings
17.00
11.77
225.05%
AVAV
AeroVironment
215.85
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72.54%
KTOS
Kratos Defense
93.04
61.34
193.50%
TDY
Teledyne Technologies
633.87
134.58
26.95%
NNDM
Nano Dimension
1.60
-0.53
-24.88%
UAVS
AgEagle Aerial Systems
1.07
-0.24
-18.32%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.