Drone Delivery Canada Corp. (TSXV: FLT) is a developmental technology company. It focuses on designing, developing, and implementing a commercially viable drone delivery system within Canada. The company develops drone technology to provide retailers, service organizations, and government agencies with a just-in-time delivery service.

Key Highlights:

• Declining operating expenses: The group showed improved operational efficiency that is depicted in the total operating expenses, which declined to CAD 3.75 million in Q1FY22 as compared to CAD 4.63 million in Q1FY21. Especially the advertising and promotional expenses went down to CAD 0.038 million in the same period (Q1FY22) against CAD 1.244 million in Q1FY21.

• Reduced operating & net losses: During Q1FY22, the company managed to narrow down its operating losses to CAD 3.61 million against the operating losses of CAD 4.43 million in Q1FY21. To add more, the net losses were reduced to CAD 3.58 million in the similar period (Q1FY22) vs the net loss of CAD 4.43 million in Q1FY21. This is a positive sign as the company is reducing its losses and keeping the trend in continuation, the company might transition into net profits in the coming quarters.

Key Financial Highlights: Q1 FY22

Source: Company filings

• Technical analysis: The stock recently touched the lifetime high of CAD 2.55 in Feb 2021 and since then it is in a bearish trend, forming lower lows and lower highs continuously. The prices are near the support zone of CAD 0.50 and might see some bounce which could probably be short-lived. The Relative strength index is currently pointing at 43.11 levels which emerged from lows and the positive biasness can be assessed after the reading crosses the 60 mark (RSI). The trend determining indicators: 50 DMA & 200 DMA are hovering above the stock prices and can act as resistance in the near term.

Stock Recommendation:

The company has reported a decrease in the revenue to CAD 0.142 million in Q1FY22, against the revenue of CAD 0.194 million in Q1FY21. The group has narrowed down its operating and net losses but still, there is a long road ahead before the company turns into positive net income. The technical analysis is also showing the stock is in the downtrend and any bounce from the support may be temporary unless the prices close and sustain above 50 DMA.  On the EV/sales-based valuation the stock is currently trading at 12.8x as compared to the industry (technology) median of 2.2x, showing the stock is overvalued at these levels.

Therefore, based on the above rationale and technical analysis, we recommend a “Watch” rating on the stock of FLT at the last closing price of CAD 0.52 on May 25, 2022.

One-Year Technical Price Chart (as of May 25, 2022). Analysis by Kalkine Group

Note: The reference data has been partly sourced from REFINITV

Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario. 

Technical Analysis Summary

Disclaimer

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