Analysts are highlighting double-digit upside potential in a group of drone-related equities as the U.S. defense sector accelerates investment in unmanned systems following battlefield lessons from Ukraine. Ondas Holdings, Archer Aviation and Red Cat Holdings top the list of stocks with the highest projected gains, according to recent price targets compiled on August 18, 2026.
Ondas leads with an implied upside of 111.1% to a $19.42 target, followed by Archer Aviation at 72.1% to $10.61 and Red Cat Holdings at 67.6% to $18.33. Kratos Defense ranks fourth with 64.3% upside to $105.62, supported by its expanding production of Group 5 unmanned jets and a $46 million Army cargo drone contract secured through a partnership with Elroy Air.
The broader sector is benefiting from multiple defense contracts and technological demonstrations. Kratos’s XQ-58A Valkyrie recently flew alongside fifth-generation fighter jets, validating beyond-line-of-sight command and electronic warfare capabilities. The company plans to produce more than 150 Group 5 unmanned systems by 2026, scaling to roughly 40 Valkyries annually. AeroVironment, which holds a $990 million Army contract for its Switchblade loitering munitions, also ranks among top picks with a 24.2% upside to $225.77.
Analysts at Jefferies, RBC and BTIG rate AeroVironment a buy, assigning price targets between $215 and $255. The stock trades 8% above fair value with a forward P/E of 55.8x. BTIG maintains a $80 target on Kratos, implying an additional 28% upside beyond consensus, citing the company’s hypersonics exposure and Airbus partnership. Kratos shares have already gained 124% through August 2025.
Ondas’s $33 million acquisition of Aran Defense in June expanded its manufacturing footprint for counter-UAS, ISR and loitering munition platforms. Joby Aviation, which retains a $1.3 billion liquidity runway, is also viewed favorably with a 45.4% upside to $10.68, supported by partnerships with Toyota and Delta. Redwire, another beneficiary of defense spending, offers 11.9% upside to $14.56.
The sector’s momentum is reflected in exchange-traded funds such as the Defiance Drone ETF and REX Drone ETF, which track companies positioned to capitalize on rising demand for unmanned aerial systems across military and commercial applications.
