Ondas stock in focus as its short interest hits 40% ahead of earnings

Ondas stock continued its strong rally this week, reaching its highest level since June 8 as the company received a new order from Israel. It has now jumped by over 70% from its lowest point this year. Even so, it is one of the most shorted companies in the US, with a short interest of over 40%.

Ondas wins a large drone contract in Israel ahead of earnings

Ondas, a company in the defense industry, won a large order from the Israel Defense Forces (IDF) to build low-cost drones in a program known as the Digital Bat. This contract covers the aerial platform, autonomous capabilities, and software. 

The new contract comes after the company announced David Barnea, the former head of the Mossad as the Chairman of Ondas Defense. It came after the company received a 450 million US Army order for its tactical Lethal Unmanned Systems (LUS). This order is part of the previously granted $982 million multi-year Indefinite Delivery, Indefinite Quantity (IDIQ) program.

These contracts come at a time when the US-Iran and Ukraine-Russia wars are changing how battles are fought. Instead of relying on traditional weapons, these wars are mostly focusing on low-cost drones that are equally capable.

The most recent results showed that Ondas’ business was doing well, with the management expecting the trend to continue. Its Q1 revenue soared 10x to $50.1 million, driven by its core growth and strategic acquisitions. 

Analysts expect the upcoming results to show that its revenue jumped by 983% to $67.9 million in the last quarter. It will then grow by 1,428% in the current quarter to $154 million, with annual revenue this year soaring to $524 million and $985 million. This trajectory makes it one of the fastest-growing companies in the industry.

Still, Ondas is one of the most shorted companies in the US, with a short interest of 40%. This means that almost half of its float is held by short-sellers, who are mostly concerned about its valuation and dilution. TradingView data shows that it has been a dilution machine, with the outstanding shares soaring to 469 million from 40 million in 2022.

ONDS is not highly followed in Wall Street. In a recent note, Scott Searle, a Roth Capital analyst, initiated the company with a buy rating and a target of $13. Northlands, HC Wainwright, and Stifel also have a bullish forecast for the company.

Ondas stock price technical analysis

ONDS stock chart | Source: TradingView

The daily chart shows that the ONDS stock has jumped in the past few days as investors bought the dip. It has already crossed the important resistance level of $7.80, its lowest level on March 30th. 

The stock has also jumped above the 50-day Exponential Moving Average (EMA), while the Relative Strength Index (RSI) has soared to 65. Therefore, the stock will likely continue rising as bulls target the resistance at $15. However, with earnings coming out today, and with its short interest rising, its volatility may become elevated.