TenQ

The Red Cat story

Red Cat builds drones and robotic systems for defense customers, with the central question whether Army drone orders and its maritime expansion can support production growth without persistent cash losses.

Red Cat stock reportTenQ Score 4/36 · every chart and check from its filings
  • $4.72share price, last close
  • $721Mmarket value
  • 4/36TenQ Score checks passed

The story in brief

  • Army orders anchor expansion. Teal Drones received a $9.5 million additional purchase order in May 2026 under the U.S. Army’s Short Range Reconnaissance Program of Record.
  • Growth precedes profitability. Revenue rose 527% to $20.2 million in the quarter to June 2026, but the operating margin over the last twelve months was -150.2%.
  • Offerings replenish cash. Cash reached $325.6 million at June 30, 2026, following public offerings, while free cash flow over the last twelve months was -$158 million.

What drives the business

  • Red Cat’s defense business is anchored by Teal Drones, selected as a winner of the U.S. Army’s Short Range Reconnaissance Program of Record in November 2024, with an additional $9.5 million purchase order received in May 2026.
  • The company reports a single operating segment spanning Teal’s Black Widow tactical drones, FlightWave’s aircraft for extended reconnaissance missions, and Blue Ops’ uncrewed surface vessels.
  • In the quarter to June 2026, Red Cat reported new Black Widow orders from U.S. Air Force Security Forces and a U.S. Navy contract to lease Blue Ops’ Variant 7, which also reached full production.
  • The acquisitions of Apium Swarm Robotics in March 2026 and Quaze Technologies in May 2026 added coordinated autonomous operations and wireless recharging capabilities, extending the strategy beyond individual aircraft.
  • Revenue reached $20.2 million in the quarter to June 2026, up 527% from the comparable period, while the introduction of Hellcat extended the Black Widow architecture to allied defense customers.

What the price assumes

The reverse DCF cannot measure an implied growth rate because free cash flow and operating earnings are both negative, leaving the price dependent on future profits rather than an established cash flow base.

At $6.03 per share and a market value of $921 million, Red Cat trades at 12.9x sales against revenue of $72 million over the last twelve months.

That multiple exceeds TenQ’s sales check of under 2.5x, while the free cash flow yield of -17.1% falls short of its above 3% check.

What could change the story

  • Gross margin improved to 16.1% in the quarter to June 2026, but the operating margin of -150.2% over the last twelve months shows that production growth has not yet covered operating expenses.
  • The cash increase from $167.9 million at December 31, 2025 to $325.6 million at June 30, 2026 reflects financing rather than self funding, and further equity financing could dilute existing shareholders.
  • Inventory and prepaid inventory rose from $30.4 million to $84.8 million over the same period, committing cash ahead of deliveries while supplier constraints could delay production.
  • Military procurement cycles, appropriations uncertainty and changes to procurement rules could affect order timing, and Teal’s advancement to Gauntlet II of the Drone Dominance Program is not a procurement award.

What to watch next

  • Red Cat reaffirmed its full year 2026 revenue outlook of $150 million to $180 million, making subsequent delivery revenue the clearest test of its production expansion.
  • Gross margin relative to 16.1% in the quarter to June 2026, operating cash use and conversion of the $84.8 million inventory balance into deliveries will show whether scale is improving the economics.
  • Further Drone Dominance Program decisions, follow-on Army orders and Navy activity beyond the Variant 7 lease will distinguish procurement opportunities from contracted demand.

Sources

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