Nobody Kills Drones like EOS – with bullet and laser!

EOS has the most accurate weapon for killing drones. They have the most precise weapon that kills Russian drones in Ukraine. The stock sold off 48% from its recent all-time high, together with similar defence stocks.

EOS is our top idea for the following year. Our base case is that the stock should triple over the period. The driver will be the European Drone Wall, as well as additional sales of its laser drone weapon.

Below is a copy of an email sent out by Fearnley Securities.

What’s happened?

1. EOS has seen a sharp drawdown, off 48% from its recent $10.42 high à the momentum and sentiment that took it to these highs came following the announcement of their recent $125m HELW contract with the Netherlands, a NATO country. Management have also publicly referred to many additional HELW opportunities, with multiple countries enquiring about large scale orders; South Korea and other EU nations.

2. Management have long cited that progress towards peace deals in Ukraine and the Middle East may contest with the sentiment that has driven capital allocation to defence stocks globally, however the fact remains that drones and drone warfare are now seemingly entrenched in daily life for Russia, Ukraine, and remain in the headlines across all of Europe.

HELW state of play and opportunities:

1. Since the initial announcement of the 100KW HELW contract, EOS have since announced that their ‘Apollo’ HELW is scalable to 150KW. While we have not seen additional HELW contracts for EOS, we note that the advent of HELW purchasing is increasing, which in our view underscores that these weapons are now widely accepted as commercially scalable defence solutions, and will be a core part of all militaries moving forwards.
2. A reminder; traditional kinetic interceptors are economically unsustainable when $1,000 drones require $500,000 missiles for defeat à Russia’s 28th Sept attack on Ukraine saw 600 drones wreak havoc across Kiev à this comes at the same time the US is mulling approval of a $90bn funding package for Ukraine.

3. Multiple HELW systems are transitioning from prototype to operational deployment in 2025-2027 timeframe à But EOS remains one of the only suppliers who can deliver 150KW units:
   1. Israel Iron Beam: End 2025​
   2. UK DragonFire: 2027 on Royal Navy ships​
   3. US Army IFPC-HEL: 2024 prototypes, mass production mid-2020s​
   4. Germany Rheinmetall/MBDA: 2029-2030 maritime deployment​
   5. Taiwan T Dome
   6. EOS Apollo: 2025-2028 delivery to European NATO state​​

Reminder of the EU opportunity for EOS:

1. EOS controls over 90% of its HELW intellectual property in-house, delivering a fully ITAR-free solution – a critical differentiator that eliminates U.S. export restrictions and enables flexible licensing across all EU countries, this positions EOS to offer:
   1. Turnkey technology licensing to EU member state defense contractors.
   2. Co-production agreements establishing HELW production lines within EU borders à reminder that EOS has already licensed its technology through its partnership with Diehl Defence GmbH in Germany.
   3. Sovereign capability development meeting EU procurement preferences for 60% European-sourced defense equipment by 2030, and 40% of defense purchases be made through joint contracts by 2027.
2. The recent European Drone Defence Initiative (EDDI), released on the 16^th October, outlines EU$800bn of funding to be allocated to developing technologies such as High Energy Laser Weapons/Directed Energy Weapons in Europe.

Disclosure: 

The goal of the blog is to provide investment ideas for further research. I/we have a beneficial position in the shares discussed above either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. The article does not represent investment advice. Please do your own research before making any investment action.