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Drones have been in the news this week with mysterious sightings, mostly along the east coast. Some drone stocks have also been flying, including Red Cat Holdings (Nasdaq: RCAT), which is up some 31% over the past week and 94% over the past month.It has been an incredible year for Red Cat stock. Red Cat started the year as a penny stock. trading at about 90 cents per share. It is now up a ridiculous 938% year-to-date to around $9.14 per share.Red Cat Holdings has no connection to the recent drone sightings, but this drone manufacturer may have benefitted in part from the recent attention drones are getting. However, there are some direct catalysts that have propelled Red Cat stock higher.Here’s why Red Cat Holdings stock has been soaring.

Red Cat wins Army contract, partners with Palantir
The firm released its fiscal second quarter 2025 earnings results on Monday, December 16, and the numbers were not all that impressive.Red Cat only generated $1.5 million in revenue for the quarter ended October 31, which was down from $3.9 million the same quarter a year ago and well below estimates of $4.3 million,The company had a gross loss of $23,475, down from a gross profit of $1.2 million in fiscal Q2 the year earlier. It also had a net loss of $13.3 million in the quarter, or -18 cents per share, down from a $5.8 million net loss in the same quarter a year ago. The analysts that cover the stock had projected a 9 cents per share net loss.The results were largely due to a strategic decision to temporarily stop production on its Teal 2 drone to focus on its Black Widow drone. The reason is because Red Cat won a contract last quarter from the U.S. Army’s Short Range Reconnaissance (SRR) program for its Black Widow, so it shifted its focus there.“In the second half of 2024, our company decided to focus on the Black Widow, anticipating its success in the SRR final production contract,” Jeff Thompson, Red Cat CEO, said. “We halted production of the Teal 2 to retool for the Black Widow, prioritizing long-term growth over short-term revenue.”Thompson said this strategic shift allowed Red Cat to meet the demands of the new Army contract and all other Black Widow sales and programs of record.There was more news involving the Black Widow. Red Cat formed a strategic partnership with AI stock Palantir Technologies (NASDAQ:PLTR) to integrate Visual Navigation software into Red Cat’s Black Widow drones.Thompson said Palantir’s artificial intelligence and visual navigation capabilities will make the Black Widow one of the most capable drones ever fielded by the Department of Defense.“This rucksack-portable drone, powered by Palantir’s software, will boost revenue per drone and increase gross margins,” Thompson said.

Red Cat scores several wins
Red Cat’s shares were rising on the future opportunities from the contract with the U.S. Army and the Palantir partnership. But there were others wins in the quarter as well. The firm secured a $1 million contract for its Edge 130 Blue drones from the United States Army Communications-Electronics Command (CECOM).In addition, it closed on its acquisition of FlightWave, a drone technology provider, and signed a contract with the U.S. Air Force for FlightWave’s drone technology. Further, Red Cat introduced its Arachnid family of unmanned intelligence, surveillance, and reconnaissance (ISR) and precision strike systems.The company also broke ground on a new manufacturing facility to increase its production capacity and scale future operations.

Revenue guidance boost for 2025
The momentum led Red Cat to set revenue guidance of $80 to $120 million for calendar year 2025. For perspective, Red Cat generated $18 million in revenue in fiscal year 2024 and has made $4.3 million in revenue over the past six months. So, $80 million to $120 million would be a huge step up for Red Cat.Not many Wall Street analysts cover Red Cat, but those that do rate it a buy with a median price target of $10.50 per share. But this week, Ladenburg raised Red Cat’s price target to $15 per share, which would be a 64% increase over the current share price.Investors should always be cautious when investing in unprofitable companies, but Red Cat should be certainly one to put on your radar. It has a lot of momentum in a field that is getting a lot of attention.More By This Author:The Top 5 S&P 500 Stocks Of 2024
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