Ondas Stock: Still a Buy After 110% Surge?
💡 Key Takeaway
Ondas' massive backlog growth and military contracts suggest the stock still has upside despite its high valuation.
What Happened: Ondas Soars on Drone Demand
Ondas Holdings (ONDS) has seen its stock surge approximately 110% over the past year, driven by its strategic pivot from wireless broadband to commercial and military drones. The company's backlog skyrocketed from $68 million to $613 million in just six months, reflecting a massive increase in demand for its drone technology.
This growth is fueled by ongoing conflicts in Ukraine and Iran, which have highlighted the critical role of drones in modern warfare. Ondas has capitalized on this trend by securing contracts from the U.S. Army, U.S. Air Force, and even Israel, which selected Ondas to build its next-generation military attack drones.
To accelerate its go-to-market capabilities, Ondas made key acquisitions and partnered with Palantir (PLTR) to integrate its ground, air, and stratospheric domains into a single AI-driven operating platform. This partnership aims to scale Ondas' operations and enhance its competitive edge.
Despite its impressive gains, Ondas remains a small player compared to defense giants like Northrop Grumman (NOC) and RTX (RTX), with a market cap of just $4.3 billion. However, its recent contract wins suggest it can compete with these established players.
Looking ahead, the military drone market is projected to grow at a 26% compound annual growth rate (CAGR) through 2031, reaching $109 billion. Analysts expect Ondas' revenue to increase more than tenfold in 2026, followed by an 87% growth in 2027, positioning the company to outpace the industry average.
Why It Matters: Growth vs. Valuation
Ondas' stock price has already risen significantly, but the underlying fundamentals suggest there may be more room to run. The company's backlog growth from $68 million to $613 million indicates strong demand and future revenue visibility, which is crucial for a growth stock.
While Ondas currently trades at a high price-to-sales (P/S) ratio of 29, this is expected to drop to a forward P/S of 8 as revenue projections materialize. This suggests that the market is pricing in substantial growth, but if Ondas delivers on its forecasts, the stock could still be undervalued.
The contracts from the U.S. and Israeli militaries are particularly significant, as they validate Ondas' technology and ability to compete with larger defense contractors. Winning these contracts often leads to follow-on orders and long-term partnerships, providing a stable revenue stream.
However, investors should be cautious about the risks. The defense industry is highly competitive, and Ondas' growth projections are aggressive. If the company fails to meet these expectations, the stock could face a sharp correction given its high valuation.
Overall, the news is positive for Ondas, but the key question is whether the growth can justify the current price. With a forward P/S of 8, the stock appears reasonably valued if the company can execute on its backlog and expansion plans.
Source: The Motley Fool
Analysis generated by Bobby AI quantitative model, reviewed and edited by our research team. This is not financial advice. Always do your own research before making investment decisions.
Bobby Insight
Ondas stock is still a buy for investors with a high risk tolerance, given its explosive growth potential and reasonable forward valuation.
The company's backlog growth and contract wins demonstrate strong demand, and the forward P/S of 8 is attractive for a company with projected revenue growth of over 1000% in 2026. However, the high current P/S and execution risks warrant caution, so investors should size positions accordingly.
What This Means for Me
