On Thursday, Ondas Holdings Inc. (NASDAQ: ONDS) experienced a revision in its stock outlook by Maxim Group, with the firm lowering the price target to $1.50 from the previous $2.00 while maintaining a Buy rating. The adjustment follows the company's second-quarter 2024 financial report released on Wednesday, before market open, which showed revenues falling short of expectations. However, the EBITDA loss for the quarter was slightly better than anticipated.
The report from Wednesday indicated that Ondas Holdings' drone division, Ondas Autonomous Systems (OAS), is gaining traction with significant contracts and is expected to increase revenue in the second half of 2024 and into 2025. This growth projection is based on the expansion of existing customer fleets and new customer acquisitions, including an initial order from Iron Drone for counter-drone activities.
Despite these positive developments, the company's Ondas Networks (ON) business is facing challenges with low visibility and delayed orders, even as it works towards a September 2025 deployment deadline.
Due to the weaker-than-expected performance in the first half of 2024 and the ongoing uncertainties in both the OAS and ON segments, Maxim Group has revised its revenue projections for Ondas Holdings. The 2024 revenue estimate has been reduced to $9.5 million from $25.8 million, and the 2025 forecast has been decreased to $51.3 million from $74.1 million.
As of the end of the second quarter of 2024, Ondas Holdings reported having $4.9 million in cash and equivalents, a significant drop from $14.5 million at the end of the first quarter. The company is also managing $29.5 million in convertible debt, with an approximate annual burn rate of $28 million. Although this burn rate is expected to decline sharply as revenue increases, additional capital is anticipated to be necessary by the fourth quarter of 2024.
The valuation of Ondas Holdings by Maxim Group, at 1.4 times Enterprise Value to estimated 2025 revenue, supports the firm's decision to maintain a Buy rating. The new price target of $1.50 is based on a multiple of 2.5 times the revised 2025 revenue estimate, an increase from the previous multiple of 2.0 times.
In other recent news, Ondas Holdings Inc. reported a challenging start to 2024, with second-quarter revenues of around $1 million, a significant decrease from the $5.5 million reported in the same quarter the previous year. This was attributed to delayed railroad deployment plans and the impact of the Gaza war.
Despite a negative gross profit of $190,000 and an operating loss of $8.3 million, the company achieved key technical and operational milestones, including systems integration in the 900 megahertz network and securing orders for autonomous counter-drone platforms and emissions monitoring for the U.S. Coast Guard. Ondas also reported $5 million in cash and equivalents, with plans to equitize $29.2 million in convertible notes.
The company anticipates a stronger second half of 2024, with expectations for a material recovery in revenue. Despite slower progress in wireless technology deployment for rail customers, Ondas remains optimistic about future opportunities and sees a significant market opportunity in transit networks.
Further, a significant order from a government customer in the UAE is expected, with plans to deploy 22 systems by the end of 2025. These are recent developments that reflect the company's focus on its long-term strategy, despite the current challenges.
InvestingPro Insights
Recent data from InvestingPro provides a nuanced view of Ondas Holdings Inc. (NASDAQ: ONDS) financial health and market performance. The company's market capitalization stands at a modest $38.97 million, reflecting the size of the business in the current market.
Despite impressive revenue growth of 218.22% in the last twelve months as of Q1 2024, the quarterly revenue saw a sharp decline of -75.92%, indicating potential volatility or seasonal effects in their business operations. This aligns with the InvestingPro Tips that highlight the company's high price volatility and significant stock price fluctuations over various time frames, including a -28.67% return over the last three months.
The company's gross profit margin remains relatively healthy at 36.15%, but the adjusted operating income shows a substantial loss of -$34.7 million, which may be a cause for concern given the company's cash burn issues. The InvestingPro Tips also suggest that Ondas Holdings is quickly burning through cash, with short-term obligations exceeding liquid assets, indicating potential liquidity challenges ahead. Furthermore, analysts do not expect the company to be profitable this year, which may impact investor confidence despite the growth prospects of the Ondas Autonomous Systems division.
Investors interested in a deeper analysis can find additional InvestingPro Tips for Ondas Holdings Inc. at https://www.investing.com/pro/ONDS, which includes insights into the company's valuation, stock performance, and profitability metrics.
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