Stifel Names Ondas Holdings Top Pick in Unmanned Systems Sector

An analyst at Stifel has highlighted Ondas Holdings (NASDAQ:ONDS) as a top investment choice within the unmanned systems sector, citing a series of strategic acquisitions that are reshaping the competitive landscape for precision strike technology. The analysis comes as defense contractors increasingly focus on the growing market for loitering munitions and small unmanned aerial systems (sUAS).

In a research note, Stifel analyst Jonathan Siegmann assigned a Buy rating to Ondas. The firm's positive outlook is based on the broader industry trend of weapon systems transitioning from traditional mechanical components to software-defined, electronic architectures.

Key Acquisition of GATE Technologies

A central part of Stifel's thesis is Ondas's acquisition of GATE Technologies, an Israeli defense technology firm specializing in critical electronic components. The deal terms include:

• An upfront payment of $205 million, comprised of $105 million in cash and $100 million in stock.
• A potential earn-out of up to an additional $185 million tied to EBITDA targets through 2028.

GATE Technologies focuses on Electronic Safety and Arming Devices (ESADs) and electronic fuzing for rockets, missiles, and drones. Siegmann noted that ESADs are a "consumable, deeply embedded, core component" currently facing supply shortages. GATE's technology is already qualified in over 90 global weapons systems.

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Financial Outlook and Strategic Position

GATE, founded in 2006, is projected to generate $65 million in revenue for the full year, with forecasts reaching $180 million by 2028. Approximately 80% of its revenue comes from outside the Middle East, largely through its Polish manufacturing subsidiary, Bron Technologies.

Siegmann emphasized that this non-ITAR Polish production base, combined with a planned U.S. facility set to open in the first half of 2027, allows Ondas to access multiple funding sources. The analyst described Ondas as a "differentiated company" gaining access to "battle-proven Israeli technology" and suggested investors could position themselves ahead of future earnings reports.

Recent Performance

The analyst's note follows strong recent performance from Ondas, which reported record second-quarter revenue of $83.8 million, exceeding analyst expectations and leading the company to raise its full-year guidance. Concurrently, Ondas announced a definitive agreement to acquire Aran Defense Ltd., another Israeli firm, for approximately $33 million to further expand its presence in the region.