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Penny stocks are those that trade for less than $5 per share. These stocks often represent rapidly growing companies in disruptive industries. They may seem like a bargain, and the upsides can be tempting. However, savvy investors understand that not all small businesses grow to be successful.
Penny stocks of companies with a clear growth strategy can thrive in the long run if their core business is successful. One such penny stock is Airship AI Holdings (AISP), which is capitalizing on the rapidly expanding artificial intelligence (AI) market. Airship recently bagged a contract with the U.S. Department of Homeland Security (DHS), attracting investor attention. The stock is up 222% in the year to date, outpacing the overall market. Wall Street believes there is a lot more to come.
Let’s find out if this penny stock is a buy now.
Airship AI: Navigating Its Way in a Sea of AI Stocks
Founded in 2006 and valued at $119.2 million, Airship AI Holdings creates AI-powered platforms for real-time data analytics, predictive modeling, and intelligent automation. It serves clients in defense and security, law enforcement, and transportation and logistics. Its offerings include Outpost AI, Acropolis, and Airship Command.
The company's revenue is growing rapidly as a result of increased adoption of its AI-powered platforms, particularly in the defense and logistics sectors. Revenue growth has been impressive, rising from $13 million in the fiscal 2021 to $24.1 million in the trailing 12 months.
For the first nine months of fiscal 2024, the company reported product revenue of $16.5 million, and total revenue of $19.8 million, close to hitting analysts’ full-year estimate of $24.35 million. That would represent year-over-year growth of 96.7% from fiscal 2023. Airship has also started reporting consistent quarterly profits after a string of losses, reflecting improved operational efficiency and higher revenue streams.
In the most recent third quarter of fiscal 2024, the company reported net earnings of $0.17 per share, compared to a loss of $0.07 per share in the year-ago quarter. Analysts expect the company's losses to decrease by fiscal 2025, with a profit of $0.06 per share.
Management believes that President Donald Trump's re-election will allow them to “capitalize on increased investments in technology supporting securing the border” as the company’s pipeline heavily supports the Department of Homeland Security (DHS) and specifically, Customs and Border Protection (CBP).
In the third quarter, the company secured a $4 million contract for a DHS agency, offering its advanced integrated solutions via Outpost AI to provide real-time intelligence collection operations along the U.S. border.
On the plus side, government and defense contracts can be dependable, secure, and long-term, resulting in a recurring revenue stream. On the other hand, they are also subject to budget constraints, as management stated in the third quarter. President Paul Allen noted, "Historically, our third quarter has been slower due to the focus on the US government's fiscal year-end, during which many of our larger opportunities are put out for bid in September. We also saw several large opportunities pushed back to FY 2025 or significantly reduced due to budget constraints across multiple federal agencies."
The company also received a $1.2 million contract for its Acropolis Enterprise Video and Data Management Platform to support a transportation and e-commerce company's global operations.
While companies leveraging AI may appear to be great stocks, not all companies have the resources or capital to invest heavily in AI. Cash burn remains a major concern for early stage AI companies. Recent fundraising rounds have increased Airship's cash reserves, ensuring adequate funding for R&D and expansion efforts. Airship raised $7.3 million in net proceeds from an at-market public offering. At the end of the quarter, cash and cash equivalents totaled $6.5 million.
Airship AI operates in a highly competitive environment alongside firms like Palantir Technologies (PLTR), Nvidia (NVDA), C3.ai (AI), and many others. Thriving in this market will take a lot of work on Airship’s part.
Analysts expect revenue to further increase by 30.4% to $31.75 million in fiscal 2025. Trading at 3.7x forward sales, Airship is not expensive.
What Does Wall Street Say About AISP Stock?
Overall, the stock is a “Strong Buy" on Wall Street. The average target price for the stock is $8.50, which implies the stock can rally 55% over current levels. The high price estimate of $11 suggests the stock could double over the next 12 months.
The Bottom Line on AISP Stock
According to Statista, the global AI market is projected to grow at a compound annual growth rate (CAGR) of 28.5% through 2030. Airship AI provides a diverse portfolio of AI-powered products and services designed to address complex challenges in high-growth sectors like defense and logistics.
The company is working to strengthen its position so that it can gain a significant market share in this space. However, given that it's a small company that is still not consistently profitable, it offers a high-risk, high-reward investment opportunity.
While AISP stock upside may look tempting, investors must weigh the pros and cons of investing in penny stocks based on their risk tolerance before making any investment decisions.
