Issue #83

As the U.S. defense budget pivots toward autonomous systems, these two companies are securing the critical infrastructure of modern warfare.

The drone revolution isn’t being won by hobbyist toys or delivery concepts—it’s being decided on the battlefield and in secure industrial sectors where reliability is a matter of national security. As global defense strategies shift toward "small, smart, and many," the conversation has moved away from speculative tech to the mission-critical infrastructure that can survive a contested environment.

This is where the drone economy shifts from experimentation to essential defense architecture—and where a new class of "Blue UAS" leaders is emerging to replace aging legacy systems.

👉 One company is providing the "secured autonomy" and encrypted nervous system that allows drones to operate in the world’s most intense electronic warfare zones.

👉 The other is the "Black Widow" of the skies, having just secured a massive U.S. Army program of record to become the standard-issue eyes for the modern soldier.

👉 Both are deeply integrated into the Western defense supply chain, scaling revenue at triple-digit speeds, and are increasingly indispensable to global security.

In this edition, we break down the cybersecurity brains and the American-made hardware leading the drone economy—and why these two stocks are the foundational pillars of the next decade of autonomous warfare and surveillance.

Mobilicom (NASDAQ: MOB)

Mobilicom (NASDAQ: MOB) is a leading provider of end-to-end cybersecurity and robust communication solutions for the rapidly evolving drone, robotics, and autonomous systems sectors. Its specialized hardware and software suites empower defense and commercial manufacturers to secure and manage mission-critical unmanned platforms in increasingly contested environments.

Business Model and Revenue Streams 📦

Mobilicom’s business model is centered on being a high-value "inside" technology partner for Tier-1 drone and robotics manufacturers. Rather than building the airframes themselves, Mobilicom provides the essential "nervous system"—the datalinks, flight control stations, and cybersecurity layers—that allow these machines to operate safely. The company generates revenue through three primary channels:

• Hardware and Embedded Systems: This is the core revenue driver, involving the sale of high-performance modules like the SkyHopper software-defined radios and Ground Control Stations. Mobilicom is currently transitioning from pilot phases to high-volume "series production" with major global defense contractors.
• High-Margin Software Licensing: Through its Secured Autonomy™ framework and ICE (Immunity Cybersecurity Encryption) software, Mobilicom earns licensing fees. This segment is key to the company’s long-term profitability strategy, as software offers significantly higher margins than hardware components.
• Professional Services and NRE: Mobilicom earns revenue through Non-Recurring Engineering (NRE) fees and specialized consulting for platform design and certification, particularly helping clients navigate stringent military standards like the Pentagon's Blue UAS requirements.

The company's performance is heavily influenced by macroeconomic policies and defense spending cycles. In 2026, Mobilicom is a direct beneficiary of increased U.S. and NATO defense budgets focused on autonomous systems. For instance, the Pentagon’s fiscal 2026 budget allocated over $9.4 billion for aerial combat drones, creating a massive tailwind for Blue UAS-validated suppliers like Mobilicom. However, as a global entity, it must navigate trade regulations and the reorganization of global supply chains, which can impact component costs and lead times.

Recent Performance and Corporate Developments 📈

Mobilicom demonstrated a significant operational pivot in late 2025 and early 2026, characterized by a successful transition to a more investor-friendly corporate structure and a sharp increase in sales to the U.S. market.

Recent Financial Highlights: 💰

• Revenue Growth: In Q3 2025, the company reported revenue of $987,000, representing a 63% sequential increase from the previous quarter. Notably, 84% of this revenue was derived from the U.S. defense market.
• Operational Efficiency: Mobilicom has maintained a disciplined cash position, with a monthly burn rate narrowing to approximately $305,000, supported by a cash balance of roughly $16.4 million (as of late 2025).
• Backlog and Momentum: The company entered 2026 with a strong order backlog and recently announced a new "design win" and initial order from a prominent United Arab Emirates-based arms manufacturer in January 2026.

Strategic Initiatives and Mergers: 🤝

In December 2025, Mobilicom successfully completed a major corporate transition, moving from American Depositary Shares (ADSs) to a direct listing of ordinary shares on the Nasdaq. This move, coupled with a 1-for-275 reverse split, was designed to simplify the share structure, reduce administrative fees, and increase eligibility for U.S. indices and ETFs. While there have been no recent large-scale mergers, the company has focused on strategic partnerships, such as its collaboration with Aitech to integrate Mobilicom's cybersecurity software into NVIDIA-based AI supercomputers for drones.

Profitability and Fair Value 🎯

While Mobilicom is still in its growth phase and not yet consistently profitable on a GAAP basis, it is approaching a critical "inflection point." The path to profitability is built on scaling its high-margin software-as-a-service (SaaS) and cybersecurity subscriptions.

Regarding fair value, the stock is currently seen by growth-oriented analysts as undervalued relative to its massive Total Addressable Market (TAM) in defense cybersecurity, which is projected to reach billions by 2030. With a market cap hovering around $72.5 million and a strong cash-to-debt ratio, the company’s valuation is primarily driven by its "design wins" that lock in future long-term revenue as customers move into mass production.

Analyst Estimates and Ratings 📊

• Consensus Rating: The consensus among analysts remains a "Strong Buy." Mobilicom has been one of the few micro-cap drone stocks to receive consistent buy recommendations over the last 30 days.
• Price Target: Analysts have recently updated their price targets to reflect the 2026 momentum. Current targets range from $10.00 to $12.00, suggesting a significant potential upside from its current trading range.
• Sentiment: Recent reports from firms like WallStreetZen and individual defense tech analysts highlight the company's "Blue UAS" status as a major competitive moat that justifies a premium valuation.

Investor-Focused Takeaway: Is MOB Right for Your Portfolio?

Mobilicom offers high-leverage exposure to the "drone wars" and the critical need for cybersecurity in autonomous systems. Unlike many hardware-only players, its focus on embedded software provides a more scalable and potentially more profitable path forward.

What to Watch in the Near Term: 📈

• U.S. Defense Contracts: Monitor for any large-scale "production orders" following previous design wins, as these are the catalysts that will drive the next leg of revenue growth.
• Blue UAS Expansion: Watch for additional Mobilicom products being added to the Department of Defense's approved list, which acts as a "golden ticket" for federal procurement.
• Cash Runway: While the company has a solid cash buffer, any moves toward reaching break-even status in late 2026 will be a major signal for institutional investors.

Recommendation:

Mobilicom (MOB) is a high-risk, high-reward play in the defense-tech sector. It is best suited for investors who believe in the long-term necessity of secure, autonomous drone fleets and are looking for an entry point into a company that has just "cleaned up" its share structure and is entering its most productive sales cycle yet.

Red Cat Holdings (NASDAQ: RCAT)

Red Cat Holdings (NASDAQ: RCAT) has rapidly transformed from a drone software startup into a powerhouse of American-made military hardware. Positioned as a direct response to the "Blue UAS" movement, Red Cat provides the U.S. military and its allies with small, autonomous, and secure unmanned aerial systems (sUAS) that serve as the front line for modern reconnaissance.

Business Model and Revenue Streams 📦

Red Cat’s business model is strategically aligned with the "Decoupling from China" trend in defense technology. The company operates as a parent organization for high-performance drone subsidiaries, primarily Teal Drones and FlightWave Aerospace. Its revenue architecture is built on three pillars:

• Primary Defense Contracts (SRR Program): The lifeblood of Red Cat's current growth is the U.S. Army’s Short Range Reconnaissance (SRR) program. By securing "Program of Record" status for its Black Widow™ drone, Red Cat has shifted from speculative bidding to a predictable multi-year production ramp.
• Multi-Domain Expansion (Maritime): In a major strategic pivot for 2026, the company launched Blue Ops, Inc., a division focused on Uncrewed Surface Vessels (USVs). This allows Red Cat to capture a slice of the naval defense budget, expanding its footprint from the sky to the sea.
• International Military Sales (FMS): Red Cat leverages its NATO-approved status to sell to global allies. Recent wins in the Asia-Pacific region (January 2026) highlight a growing international revenue stream that reduces reliance solely on U.S. domestic policy.

Macroeconomic Policy Impact:

Current defense policies are the primary catalyst for RCAT. With Section 1709 of the NDAA effectively banning foreign-made drones in federal use, Red Cat faces significantly less competition. Furthermore, the 2026 U.S. defense budget's emphasis on "low-cost, attritable" systems—drones that are cheap enough to lose in combat—directly favors Red Cat’s mass-production capabilities over expensive, legacy aerospace "prime" contractors.

Recent Performance and Corporate Developments 📈

Red Cat is currently experiencing a "breakout" year in 2026, characterized by staggering revenue jumps as they move from development into Limited Rate Initial Production (LRIP).

Financial Performance Highlights (Early 2026 Reports): 💰

• Revenue Surge: In January 2026, the company issued preliminary results for Q4 2025 showing revenue between $24 million and $26.5 million—a massive 1,842% increase year-over-year.
• Annual Growth: Full-year 2025 revenue reached approximately $41 million, exceeding analyst consensus by nearly 15%.
• Liquidity: The company entered 2026 with a robust cash position of over $200 million, providing enough runway to fund its massive manufacturing expansion in Georgia and Utah without immediate need for dilutive financing.

Strategic News and Mergers: 🤝

There have been no major mergers in early 2026, as the focus has shifted toward integration and scaling. However, the recent partnership with Palantir to integrate AI-driven navigation (VNav) into the Black Widow drone has been a key technical milestone. Additionally, Red Cat's inclusion in the S&P Aerospace & Defense Select Industry Index has significantly increased institutional ownership and liquidity for the stock.

Profitability and Fair Value 🎯

Red Cat is currently in the "growth at all costs" phase. While revenue is skyrocketing, the company reported a net loss of over $50 million in 2025 due to aggressive expansion and R&D.

• Profitability Path: Management expects "operating leverage" to kick in by late 2026 as their new 155,000-square-foot facility in Georgia reaches full capacity. High-volume production typically lowers per-unit costs, which is the key to turning their currently thin gross margins positive.
• Fair Value: Valuation is a point of contention. Some analysts see a "fair value" around $18.00–$19.50, citing the massive contract backlog. However, with a Price-to-Sales (P/S) ratio significantly higher than the industry average, the stock's current price (around $14.00) reflects high expectations for continued 100%+ annual growth.

Analyst Estimates and Ratings 📊

• Consensus Rating: Red Cat holds a "Strong Buy" consensus. In the last 30 days, it has been one of the most upgraded stocks in the aerospace sector.
• Price Targets: Following the Q4 revenue blowout, firms like Northland Securities and Jefferies raised their targets. The average 12-month price target is $17.34, with high-end estimates reaching $23.10.
• Institutional Sentiment: The "Put/Call" ratio for RCAT is currently 0.36, signaling a very bullish outlook from professional traders.

Investor-Focused Takeaway: Is RCAT Right for Your Portfolio?

Red Cat is no longer a "penny stock" story; it is a legitimate defense manufacturer. The 1,800% revenue growth is a rare signal that the company has successfully crossed the "valley of death" between prototyping and mass production.

What to Watch in the Near Term: 📈

• Maritime Launch: Watch for the first shipments of the Blue Ops USVs in Q2 2026. Success here would prove Red Cat can dominate more than just the aerial market.
• Short Interest: Approximately 20% of the float is currently shorted. Any further positive contract news could trigger a significant "short squeeze."
• Margin Improvement: Look at the next quarterly report to see if gross margins are climbing toward the 20% mark as production scales.

Recommendation:

RCAT is a premier choice for investors looking to play the "Small Drone Revolution" in modern warfare. While the lack of current profitability makes it volatile, its "Program of Record" status with the U.S. Army provides a level of revenue security that most drone startups lack.

Final Take: The Cybersecurity Brain and the Tactical Hardware Powering the Drone Era

The drone revolution isn't just about flight—it’s about survival in contested zones. Achieving dominance requires two things: software that shields communication from electronic warfare and hardware that can be mass-produced and deployed at the tactical edge.

That’s where Mobilicom (MOB) and Red Cat (RCAT) stand apart.

🛡️ Mobilicom (MOB) — The Cybersecurity Brain of Autonomous Systems

• ✔ Blue UAS Framework: Essential, government-vetted security for mission-critical drones.
• ✔ High-Margin Pivot: Shifting from hardware modules to recurring software licensing and "Secured Autonomy."
• ✔ Geopolitical Tailwind: Direct beneficiary of NATO’s urgent push for unhackable communication links.
• ➤ Best for: Investors looking for a high-margin, software-heavy play on the "nervous system" of global robotics.

🦅 Red Cat (RCAT) — The Tactical Hardware Standard for the Modern Soldier

• ✔ Program of Record: The U.S. Army’s choice for Short Range Reconnaissance with the Black Widow drone.
• ✔ Exponential Scaling: Recent 1,800% revenue growth as production moves into high gear.
• ✔ Multi-Domain Reach: Expanding beyond the air with a new dedicated division for maritime surface vessels.
• ➤ Best for: Investors seeking pure-play, high-growth exposure to the massive American manufacturing ramp-up in defense tech.

Investor Insight

🧩 Want the "Intel Inside" of secure drone communication and AI encryption? → MOB

⚙️ Want the dominant, American-made hardware provider with a massive U.S. Army backlog? → RCAT

Bottom Line:

The future of defense doesn't rely on a few expensive aircraft; it relies on thousands of smart, secure, and attritable systems.

Mobilicom provides the immunity from cyber threats, while Red Cat provides the physical eyes on the ground. As global military spending shifts toward autonomous fleets, MOB and RCAT aren’t just niche players—they are the foundational infrastructure of the next generation of warfare.

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Happy Trading
​— Team Premium Stock Alerts