Palladyn AI Presents New Portfolio Paradigm

By Larry Ramer

Given the potentially momentous nature of Palladyne AI’s (PDYN) innovations and its relatively low market capitalization, I view PDYN stock as a good stock to buy for risk-tolerant growth investors.

Also importantly, the company’s technology has been at least somewhat validated by the U.S. Air Force, while the stock’s recent, huge run suggests that the Street is getting excited about the company’s prospects.

Finally, the recent, meaningful pullback of the shares will likely prove to be a very attractive entry point for investors. Ahead of the first trading day of 2025, PDYN stock is down more than 2% in this morning’s pre-market activity, extending the 7.8% decline seen as markets wrapped up the year on Tuesday.

Extremely Impressive Innovations

The company reported that its AI-powered platform allows “robots to perceive variations or changes in the real-world environment, enabling them to autonomously maneuver and manipulate objects accurately in response.” Of course, at a time when multiple companies, such as Tesla (TSLA) and Serve Robotics (SERV), are working hard to improve the performance of their autonomous robots, there could be huge demand for Palladyne’s platform.

In October, the company announced that it had completed Phase 1 of its contract with the USAF. Under the deal, the Air Force is both evaluating and utilizing Palladyne’s technology.

In the second phase of the contract, the company’s software will be utilized to develop aircraft components. Specifically, the software will use various techniques “to maintain the correct distance and angle for optimal application of surface preparation materials.”

Of course, to the extent to which Palladyne’s software can autonomously execute manufacturing functions that are now carried out by humans, it will be able to save organizations, including the U.S. military, a great deal of time and money. And, with the company successfully moving to the second stage of a contract which evaluates its ability to perform such feats, the technology may very well be able to help manufacturers a great deal.

Even more impressively, the company on Dec. 23 reported that its Pilot AI software platform had, reportedly for the first time ever, enabled a “small drone….to identify and prioritize terrestrial targets” and then “ follow the prioritized target autonomously.”

Palladyne stock then surged 25% premarket on what it called a “key milestone with its first small drone autonomous tracking flight.

The company indicated that, while “larger, multi-million-dollar unmanned systems” have previously been able to autonomously identify and follow targets, small, inexpensive drones have previously been unable to do so. Obviously, by providing small drones with the ability to autonomously find and track targets, Pilot AI will make these smaller machines much more valuable to militaries around the world.

That’s because, for the first time, such drones will be able to identify, track and destroy enemy targets on their own. Consequently, I’m convinced that many of the world’s makers of small drones will look to buy Pilot AI when it becomes available, in order to make their products “smart.” And for similar reasons, many militaries will purchase Pilot AI in order to equip small drones with the platform.

Palladyne management expects to commercialize the platform in the first quarter of 2025.

Low Market Cap and Strong Momentum at an Attractive Entry Point

In the 12 months that ended in September, Palladyne AI only generated $7.8 million of revenue.

Based on that metric, the stock’s market capitalization of about $369 million is very high. But given the tremendous potential of the company’s products, I view its market capitalization as almost absurdly low at this point.

That’s despite the fact that the shares rocketed 600% higher in the last three months of 2024. That rally shows that the Street has become quite excited about the firm’s outlook, auguring well for the near-to-medium term performance of PDYN stock.

At the same time, however, the shares closed 2024 down 22% from their high, potentially creating an opportunity for investors to buy the name on weakness in the new year.

Disclaimer Larry Ramer owns PDYN stock. The information provided in this article is for educational and informational purposes only and should not be construed as investment advice. Always conduct your own research or consult with a licensed financial professional before making any investment decisions. Past performance is not indicative of future results.

Larry Ramer is currently ranked 288 out of 30,431 financial bloggers analyzed by TipRanks, with a 13.8% return on his buy and sell ratings. He has been a long-time contributor to InvestorPlace, Seeking Alpha and Fintel.io. He is one of the founding contributors to this newsletter.

He focuses on contrary investing and specializes in the renewable energy and consumer discretionary sectors. Among his highly successful, contrarian picks have been Plug Power, Exxon Mobil, solar stocks, and airline stocks. On the downside, he was an early predictor of the collapse of cryptocurrencies, marijuana stocks, Ocugen, and Meta Platforms.