Commercial Drone Adoption Taking Flight

Dec. 16, 2016 3:28 PM ETAMBA, AMZN, SONY, UAVS, PAOTF2 Comments

Summary

  • The accelerating use of drones is part of a larger trend toward automation that includes advanced robotics and self-driving cars.
  • We believe the first business applications for drones will occur in logistics and automation in factory and warehouse settings.
  • Given the growing market, UAVs are drawing increasing interest from investors, and venture capital firms continue to pour funding into drone-related startups.

By Grace Su

Drones will top the wish lists of many children and hobbyists this holiday season. As technology continues to improve and costs come down, however, the much greater potential for drones should be realized in commercial applications. We expect drones will gain widespread business adoption in the next three to five years.

The accelerating use of drones is part of a larger trend toward automation that includes advanced robotics and self-driving cars. Also known as unmanned aerial vehicles ((UAVs), drones are evolving from models aimed at consumers to more sophisticated uses.

Consumer drones are typically priced under $1,000 with limited battery life, standard image resolution and basic software for flight control. China is currently the largest end market for consumer drones, though popularity is strong globally. Industry leader DJI disclosed that it sold over a million drones just in the last year.

The next step up is the "pro-sumer" market that is being driven by the growing use of video in social media and other applications. Here, photographers, videographers and other visually-driven professionals like real estate agents are purchasing drones in the $1,000 to $3,000 range that feature higher definition cameras with faster speeds, longer battery life and better image stabilization.

Beyond $3,000 lies the commercial market. Amazon.com (NASDAQ:AMZN) has drawn attention for its test deliveries using drones, and we believe the first business applications for drones will occur in logistics and automation in factory and warehouse settings, as well as for video capture.

Additionally, some companies in Japan already employ drones for crop spraying, and the technology is well-suited for other agricultural uses, such as taking images of crops and monitoring progression through the growing season. Drones could also be deployed for surveillance, industrial inspection, scientific measurement and research as well as marine applications. These areas are why we think the commercial market for

This article was written by

ClearBridge is a leading global asset manager committed to active management. Research-based stock selection guides our investment approach, with our strategies reflecting the highest-conviction ideas of our portfolio managers. We convey these ideas to investors on a frequent basis through investment commentaries and thought leadership and look forward to sharing the latest insights from our white papers, blog posts as well as videos and podcasts.

Disclosure: I am/we are long AMZN, SNE, AMBA, PARRO. 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.

Additional disclosure: All opinions and data included in this commentary are as of December 8, 2016 and are subject to change. The opinions and views expressed herein are of Grace Su and may differ from other analysts, or the firm as a whole, and are not intended to be a forecast of future events, a guarantee of future results or investment advice. This information should not be used as the sole basis to make any investment decision. The statistics have been obtained from sources believed to be reliable, but the accuracy and completeness of this information cannot be guaranteed. Neither ClearBridge Investments nor its information providers are responsible for any damages or losses arising from any use of this information.

Past performance is no guarantee of future results.

Recommended For You

Comments (2)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.