Why Did Red Cat Stock Drop Today?
Key Points
Red Cat will participate in a $742,000 Army landmine-detecting contract.
Investors probably hoped the contract would be bigger, and are disappointed today.
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Easy come, easy go, easy go... down even more.
Three weeks ago, investors in Red Cat Holdings (NASDAQ: RCAT) stock got encouraging news when it announced it would team up with artificial intelligence company Safe Pro Group to bid on a U.S. Army contract to detect landmines and other threats on the ground, by flying over them with AI-equipped Black Widow drones.
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One week ago, the news got even better when Red Cat announced that it had won the contract. There was just one problem: No one knew how much the contract was worth, or exactly how good the news would be for Red Cat.
Today we know. And Red Cat stock is falling 11.9% through 12:35 p.m. ET.
Image source: Getty Images.
Bad news for Red Cat
In a press release yesterday, Red Cat partner Safe Pro confirmed that it has just executed a $742,000 contract with the Army to deliver Red Cat Black Widow drones equipped with Safe Pro's "AI Edge Processing NODE" for translating digital imagery into threat analysis.
Let me repeat that:
The big contract win that was supposed to turn Red Cat stock into the cat's meow is worth less than $1 million -- and that money has to be split between Red Cat and its partner Safe Pro.
What it means for Red Cat
Don't get me wrong. $742,000 is better than a sharp stick in the eye. But it's not much next to Red Cat's $54.6 million in trailing revenue -- and it will look smaller still once split with Safe Pro. While there's still potential for this contract to grow as the Army gets more comfortable using the drones and AI software, for the time being, it's pretty small beans.
This, in a nutshell, is why Red Cat stock is going down.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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