Drones to Replace Reindeer This Christmas?
The personal computer, the Internet and the smartphone all revolutionized daily life. To this list of disruptive technologies we can add drones. These pilot-less aircraft represent one of the most compelling investment opportunities you’ll see in your lifetime.
And they’re about to put Santa’s reindeer out of a job.
E-commerce juggernaut Amazon (NSDQ: AMZN) announced this week that it made its first fully autonomous delivery via Prime Air, the company’s drone delivery initiative. The historic event occurred in Cambridge, England. More deliveries are planned for the holiday season.
Prime Air is designed to safely get packages to customers in 30 minutes or less. The inaugural Prime Air customer in Cambridge received by drone an Amazon Fire TV and a bag of popcorn. Amazon said it took 13 minutes from the customer clicking “order” with their computer mouse to the package arriving at their door. The company is making Prime Air deliveries at no extra cost.
Amazon said it plans to expand Prime Air to hundreds of customers in the vicinity of its British facility. The company chose England because of more favorable airspace regulations there, but the U.S. is soon catching up as the Federal Aviation Administration enacts new guidelines to expedite the civilian use of drones.
Coming to a sky near you…
No, you’re not watching a “B” science fiction movie: the skies over your neighborhood could soon be darkened with scores of pilot-less aircraft. If you’re looking for an unstoppable investment trend, the burgeoning demand for drones certainly qualifies.
Linda McDonough, chief investment strategist of Profit Catalyst Alert, says the drone industry stands on the threshold of explosive growth.
“Drones are the new frontier of consumer demand for high-definition video capture,” McDonough observes. She pinpoints a great drone play: chipmaker Ambarella (NSDQ: AMBA).
“Ambarella’s chips are flying high,” she says. “Literally. These systems-on-a-chip power the sophisticated video drones use, as well as wearable cameras, flying cameras and security cameras. Meanwhile, the demand for video is a market tsunami. YouTube estimates that 300 hours of video are uploaded to its site every single minute and 5 billion videos are watched on its website every day.”
To be sure, bargain-basement chips can power the average consumer camera that produces a YouTube video. But McDonough points out:
“Ambarella’s strategic advantage is that it has a full menu of chips from the 4K ultra-high-definition ones used for research, commercial filmmaking and equipment inspection, to the less expensive mass-market chips used in helmet-mounted sports cameras.”
Jetson-like home delivery…
There’s broad interest in the tech world in using drones to make delivery fast and efficient. Earlier this year Alphabet’s (NSDQ: GOOG) Google delivered Chipotle burritos at Virginia Tech. It has reportedly talked to Starbucks about delivering with drones. And Domino’s has delivered pizzas in New Zealand via a drone.
Increasing numbers of federal organizations such as the U.S. Coast Guard, Forestry Service and Border Patrol, as well as local police departments, are adopting drones for airborne surveillance and monitoring. These futuristic machines also are in great demand among Hollywood filmmakers, who are deploying them to get the sort of exhilarating aerial footage once unobtainable.
In addition to a growing number of commercial uses for drones, scores of hobbyists are buying drones at local stores or online and taking to the skies with a passion. It’s the rise of a new subculture, spelling multi-year profits for the dominant companies already in the space.
Drones also stand in the forefront of military technology and now they’re getting paired with manned military helicopters, to create operational synergies. These efforts are accelerating the development of advanced computer chips, which are vital to commercial drones.
And as McDonough asserts:
“Of course, the most famous use of drones is Amazon’s plan for Jetson-like home delivery, in which a drone drops your order by your front door.”
This holiday season, demand for drones (and the chips that power them) should skyrocket, with the momentum lasting well into 2017 and beyond. Linda McDonough will keep her eyes on the skies… and on the best ways to profit from this accelerating trend.
Do stock market rallies breed amnesia?
Susan B. sent me this email yesterday:
“People forget the pain investors suffered from December to March. I guess rallies give folks amnesia. But I remember buying Amazon on December 3 and by March 22, the stock had plummeted by nearly 16%. I came close to dumping it. But you folks didn’t lose faith in the stock so I hung on. You always warn us against acting on our emotions. I’m so glad that I listened. From March 22 to December 15, Amazon’s stock has risen 36% and it’s up 13% year to date. Patience is a virtue!”
Got any investment stories to tell? Email me at: firstname.lastname@example.org — John Persinos
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