Evercore ISI launched coverage of Red Cat Holdings Inc. on Monday with an outperform rating and a $15 price target, citing the company's positioning in the expanding U.S. defense drone market.
The firm's valuation implies a 77% premium to Red Cat's closing price of $8.49 on Friday. Red Cat, which trades on the NASDAQ under the ticker RCAT, reported trailing twelve-month revenue growth of 334% and projected fiscal 2026 sales in the range of $150 million to $180 million, driven by expected strength in the second half of the year.
The company's second-quarter results, released last month, showed revenue of $20.2 million, a 520% year-over-year increase but below the $22.78 million consensus estimate. Adjusted loss per share widened to $0.26 from the year-ago period, exceeding analyst expectations of $0.20.
Red Cat's portfolio includes the Black Widow reconnaissance drone, which secured the U.S. Army's Short-Range Reconnaissance program and received funding from the U.S. Air Force. The company is also advancing the Variant 7 unmanned surface vehicle, with ongoing contract discussions with the U.S. Navy.
The Pentagon's fiscal 2027 budget proposal allocates $53.6 billion to the Drone Dominance Program, described as the largest commitment to drone technology in Pentagon history. Analysts at Evercore ISI highlighted the potential for Red Cat to benefit from increased defense spending and domestic supply chain initiatives.
Recent tariff measures announced by President Donald Trump have further supported the sector. A 100% ad valorem tariff on drones weighing over 25 kilograms or equipped with thermal imaging cameras has driven gains for companies including Red Cat, Unusual Machines, Ondas Holdings, and AeroVironment.
