Drone boom? These names may benefit, pro says
With the Federal Aviation Administration drafting rules to permit the use of commercial drones, some investors are looking to see which names may benefit if and when the drones get the go-ahead.
Andrea James, vice president and senior research analyst at Dougherty & Co, has her eye on a specific segment of drone-makers.
"You want to look at names that design unmanned aircraft systems for the military because those are going to be the ones that are most optimized for commercial use," James told CNBC's "Street Signs."
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It also means looking at the smaller names as opposed to the larger ones, since the drone business is only a small part of the larger corporation's business.
One of her best bets is AeroVironment, which provides the U.S. military with about 85 percent of its drones. The legalization of commercial drones could make a big difference for the company because right now the government only spends 15 percent of its revenue on the unmanned aircraft systems, she said.
James currently has a "buy" rating on AVAV, with a $35 price target.
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She also likes Trimble, whose subsidiary Gatewing flies drones over agriculture fields and mining developments outside the United States.
Several companies have petitioned the FAA to lift its ban on flying commercial drones, including media companies, energy companies and farmers.
The agency is expected to issue its drone rules for comment later this year, and will likely require the remote-controlled pilot and plane to be certified under standards unique to small UAS. The drones also must weigh less than 55 pounds, stay within the line of sight of the pilot, and keep at least five miles away from airports.
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However, don't expect to see commercial drones flying around anytime soon. James doesn't expect early adoption until at least 2016, and she thinks it will likely be after 2020 when drones are flying everywhere.
What she does expect is a lot of regulation and new competition entering the space if commercial drones become legal.
—By CNBC's Michelle Fox. CNBC's Krista Braun and Reuters contributed to this report.
Disclosure: James does not own AeroVironment or Trimble.