Building a Position in This Drone Firm as Sellers Miss Key Takeaway
Flat wholesale inflation, cheaper oil and bond strength is driving the market higher.
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Technology is trading strongly on Thursday morning. Part of it is due to poor positioning by anticipatory bears. Breadth is running 65% positive, so this is not a narrow squeeze in a handful of names. Too many folks, including me, have been anticipating a top and the market keeps refusing to give them one. But there are some positive catalysts as well.
Flat PPI and Cheaper Oil
The July producer price index came in unchanged against expectations of a 0.2% rise. That follows Wednesday’s CPI, which landed in line at 0.1% monthly and 3.4% annual — two inflation reports in two days that gave the market nothing to worry about.
Oil is down about 2.5% and the odds of the Fed not hiking at all this year have inched up to 32% from 25% on Wednesday. A month ago, that number was 11%. Strength in bonds is the key to this action right now, and when that is combined with poor positioning it creates FOMO.
Buying This Drone Name
I’ve traded Ondas Holdings (ONDS) many times in the last few years. It made a huge move in 2025 going from under $1 to over $15 in early January 2026. It has struggled since then, but after hitting $6.50 in July I believe it is ready for the longer term trend to resume.
Ondas reported second-quarter results before the open on Thursday. The stock gapped higher on the numbers, then gave the pop back and turned lower. The give-back is modest, and not a collapse, which means that it is likely a “sell the news” move rather than a poor report.
The Quarter That Beat
Revenue came in at $83.8 million against consensus near $68 million. That is 67% growth over the prior quarter and better than 13-times the year-ago quarter. New orders hit $175 million in the period, with another $105 million already booked in the current one. Backlog stands at $613 million and is closer to $757 million once you fold in the recent acquisitions.
Management raised full-year revenue guidance to a range of $525 million to $550 million and guided the current quarter to $140 million to $155 million, which would nearly double the quarter it just reported.
Ondas builds military and commercial drones, systems that detect and bring down hostile drones, and industrial wireless networks. It assembled the defense part of the business by acquisition, buying DZYNE and Cyberhawk, among others, and it now sells into a U.S. Army program with a potential of $1 billion. Cash sits around $1.4 billion after the raises that funded the acquisitions, so there is no big dilution risk in the short term.
Why the Good News Sold Off
The losses are still large. Adjusted EBITDA came in at a loss of roughly $50.6 million, and the company lost $89.7 million on the bottom line. Stock compensation, amortization from the buying spree, and the cost of stitching the acquisitions together dominate the income statement. The bulls want clearer evidence that the profitability date is arriving sooner rather than later. A company growing through acquisition invites a fair question about how much of the growth is organic and how well the pieces fit together.
Management answered that question by pulling its target for adjusted EBITDA profitability forward to the fourth quarter of 2027. It put organic growth at 85% year over year. That is what the sellers are missing on Thursday morning.
The Longer Story
This is a company going from roughly $50 million in revenue last year to guidance above $525 million this year, with the sell-side modeling something near $960 million in revenues next year. Growth at that speed always comes with growing pains. Integration is messy, margins lag, share count climbs. My experience is that rapid revenue growth drives a stock price more than anything else.
How I Am Playing it
I am long Ondas and I plan to hold some portion of my position longer term. Every position I own tends to be both a trade and an investment at the same time, and I work it in more than one timeframe at once. I carry a core for the longer-term growth, and I trade around it in increments, buying on the days the stock is given away and selling some back when it rallies. I am rarely all in or all out, and the size moves with the risk I see in front of me.
A give-back on a strong report is the kind of shorter-term setup I would rather buy into than chase, as long as the stock holds the base it has built since it halved from the June high. I want the $8 area to hold. If it doesn’t, then I lighten the trading position.
The company guided the current quarter to a near-doubling of revenue. If that backlog converts on schedule over the next two reports, the profitability issue takes care of itself. For now I am giving it the room to prove the first.
At the time of publication, DePorre was long ONDS.
