By Angela Palumbo

Red Cat stock was giving back gains in after-hours trading Monday after reporting a drop in revenue, despite initial excitement when the drone technology company announced a partnership with Palantir Technologies.

After the stock market closed on Monday, Red Cat reported a fiscal second-quarter loss of 18 cents a share on revenue of $1.5 million. In the same period last year, the company posted a loss of 11 cents a share on revenue of $3.9 million.

There are only two analysts on FactSet that cover Red Cat. They expected the company to report a loss of nine cents a share on revenue of $4.1 million.

Chief Executive Jeff Thompson said in the earnings release Monday that in the second half of the year, Red Cat decided to focus on its Black Widow drone. "We halted production of the Teal 2 to retool for the Black Widow, prioritizing long-term growth over short-term revenue."

Shares of Red Cat were down 13% in after-hours trading Monday.

This decline is a contrast how the stock fared earlier in normal trading. Shares closed up 27% to $10.45 after the company announced it had entered into a partnership with software company Palantir to integrate visual navigation software into its Black Widow drones.

This collaboration use Palantir's AI software running onboard the drone to provide accurate navigation entirely independent of GPS or radio control signals, the news release said.

In a note on Monday, Ladenburg Thalmann Research analyst Glenn Mattson wrote Palantir is "on the cutting edge of AI software for government and military applications, adding them as a partner highlights the significance of RCAT's program."

Mattson rates Red Cat as a Buy with a $9 price target.

The stock, with a market cap of $810.5 million, has surged 1,087% this year, on pace for its best year since 1999, when it rose 1,411%, according to Dow Jones Market Data. Meanwhile, Palantir shares were down 0.4% Monday. That stock has a market cap of $173 billion and has jumped 341% in 2024.

Red Cat was gaining attention from retail traders on Reddit forum Wall Street Bets on Monday as one of the most talked about stocks by users. The company is also scheduled to report fiscal second-quarter earnings after the stock market closes on Monday. In the last quarter, Red Cat reported a loss of 17 cents a share on revenue of $2.8 million.

Other drone stocks were also climbing on Monday. Archer Aviation, which was recently bought by Cathie Wood's ARK Invest, rose 5.7%. Unusual Machines jumped 18% and Kratos Defense & Security Solutions was up 5.4%.

The sighting of drones throughout the Northeast has made headlines in recent weeks. The Federal Bureau of Investigation and Department of Homeland Security have said they don't have any current evidence the drones pose a threat to public safety.

Red Cat didn't immediately respond to a request for comment on the drone sightings.

Write to Angela Palumbo at angela.palumbo@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

December 16, 2024 16:42 ET (21:42 GMT)

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