The Drone Threat Is Growing! Volatus Aerospace, Rheinmetall and Deutz in Focus

Volatus Aerospace: Government Contract Gives It Wings

Originally rooted in civilian drone services for inspecting critical infrastructure, the Canadian company now focuses on the dual-use civilian-military market. Volatus operates not merely as a hardware manufacturer, but as an integrated systems provider. With cash and cash equivalents of approximately CAD 59 million, the company has sufficient funds to accelerate its expansion.

Its portfolio includes unmanned aerial systems (UAS), sensor technology, AI-powered software for real-time data processing, as well as training and maintenance. Additionally, the company distinguishes itself through its ability to conduct BVLOS (Beyond Visual Line of Sight) operations.

In addition to developing and producing its own drone systems, Volatus Aerospace is increasingly focusing on the intelligent networking of the data it collects. The SKYDRA SaaS platform plays a central role in this effort, consolidating information from various sensors and radar systems into a single application. This creates a detailed, near-real-time picture of the airspace situation.

In addition, Volatus is establishing its own manufacturing infrastructure at its Mirabel site in Québec. The production complex ensures that Canada and its NATO partners have access to a sovereign, Western drone platform. The Mirabel plant is theoretically designed for an annual production capacity of up to CAD 250 million. By qualifying for status under the North American Defence Drone Initiative (DDI) and obtaining regulatory BVLOS approvals, Volatus has secured the legal and strategic foundation for large-scale public sector contracts.

This strategic positioning is increasingly bearing fruit. Volatus recently announced a five-year contract with the Canadian government to supply tactical ISR drone systems. The initial order comprises 100 systems. In addition, the contract includes options to increase the order to a total of 5,000 drones, corresponding to a procurement framework of up to CAD 25 million.

According to the company, the contract includes not only the aircraft but also sensors, ground stations, data links, training, spare parts, as well as software and maintenance services. Delivery of the first systems is scheduled to begin in the fourth quarter of 2026.

Rheinmetall: Share Price Under Pressure Despite 60% Upside?

Rheinmetall is the undisputed leader in the European defence sector. As an integrated defence contractor, the DAX-listed company covers nearly the entire spectrum of conventional land forces. To meet the enormous demand from NATO countries, Rheinmetall is expanding its production capacities in Europe and North America in record time. Order books are at a record high of around EUR 80 billion. In addition, the group is systematically closing technological gaps through partnerships and acquisitions.

Nevertheless, the stock has been under pressure for some time. A sustained dip below the EUR 1,000 mark appears imminent. The success story has already taken a hit due to the cancellation of the F126 program. Recently, the group cut its revenue forecast to EUR 13.7 to 14.2 billion, but confirmed its margin target of around 19%. As it turned out, high inventory levels and upfront investments weighed on operating cash flow in the first half of the year. A negative figure of EUR 1.6 million was recorded.

Analysts are becoming increasingly skeptical. JPMorgan recently placed Rheinmetall on "Negative Catalyst Watch," pointing to potential short-term headwinds that could put the stock under pressure. The US bank expects the revenue mix to shift increasingly toward new business areas such as missiles, drones, and digital systems, thereby coming at the expense of the high-margin core business of ammunition and manned land vehicles. According to experts, the changed product mix and the high proportion of joint ventures in new business could therefore weigh on consolidated net income despite rising revenues. However, the average price target from analysts, at just over EUR 1,600, signals significant upside potential.

Deutz: A Renaissance as a Defence Enabler

Long perceived as a cyclical manufacturer of diesel engines for construction machinery, agriculture, and material handling, this long-established group is strategically leveraging the current defence boom to realign its business. The acquisition of Flensburger Fahrzeugbau Gesellschaft (FFG) is proving to be a decisive game-changer in this regard. With this strategic milestone, Deutz is evolving from a pure component manufacturer for engines and powertrains into an integrated systems provider for protected wheeled and tracked vehicles as well as their maintenance.

The stock market is celebrating this move and has driven the stock to a new annual high of around EUR 13. Deutz recently reported accelerated growth and a higher volume of new orders. According to management, the FFG acquisition—worth billions—could enable Deutz to achieve its 2030 targets significantly earlier. Warburg Research attests to Deutz's considerable potential and raises the price target from EUR 13.20 to 19. Analyst Stefan Augustin sees significant synergy opportunities in the combination of defence technology and the traditional engine business.

It remains exciting. At Volatus, the latest order from the Canadian government underscores the company's potential. Moreover, the Canadians have many irons in the fire thanks to their ecosystem. Deutz is currently being rediscovered and, according to analysts, has further potential. Rheinmetall is increasingly being viewed critically by analysts. However, a sober look at the experts' average price target reveals upside of more than 60%.