YB new stock pitches (Thu, Jan 16)

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Parrot S.A. (PARRO.PA), a pioneer in consumer drones, has pivoted to focus on enterprise and government contracts in Europe and the USA due to Chinese competition in the consumer market. With a market cap of €143 million and trading at €4.75, the company is well-positioned to capitalize on the growing trend of drones, AI, and UAVs. PARRO generates approximately $80 million in annual revenue, with a 40% year-over-year growth rate and about 40% of revenue coming from the USA. The company is nearing profitability following significant revenue gains and cost restructuring, supported by a clean balance sheet. This shift has placed PARRO in a more defensible market with higher barriers to entry, making it an attractive investment opportunity in the expanding drone technology sector.

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nLIGHT (LASR) is a leading provider of high-energy laser technology for defense, particularly in counter-drone systems. The company's Aerospace & Defense segment is experiencing rapid growth, with 59% revenue increase in Q3, now accounting for 54% of total revenue. LASR trades at an attractive 1.95x sales and is positioned as a key supplier for the $500M+ IRON BEAM project in Israel. While commercial revenues have declined, there's potential for a rebound, especially with possible tariffs on Chinese imports. The company has a strong balance sheet with zero debt and $100M in cash. Management projects significant contract wins in 2025, driven by increasing defense spending on counter-drone technologies. Risks include margin uncertainty and scaling challenges. The stock offers potential for a 5x return based on A&D growth and contract wins. With a conservative downside of flat performance and substantial upside potential, LASR presents an attractive investment opportunity in the growing field of laser-based air defense systems.

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I use Interactive Brokers link to trade international and OTC stocks (if you can’t trade them in your current brokerage)

QinetiQ Group plc (QQ.L) is a UK-based global defense company primarily serving AUKUS customers, with 99% of sales to government entities. The company offers experimentation, testing, engineering, and technology services, positioning it well for potential increases in UK and European defense spending. QinetiQ's diversified product base and focus on evolving battlefield needs make it a high-quality business. The company's attractive financial model includes disciplined tuck-in acquisitions, a modest buyback program, and a conservative balance sheet with 0.5x net leverage. Trading at 7.5x EBITDA, QQ.L is currently undervalued compared to its historical range (7.0x - 9.0x) and global defense peers (approximately 40% discount). Key risks include dependence on government budgets, integration challenges from a recent U.S. acquisition, potential hacking or sabotage by adversaries, and foreign exchange exposure.

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