Why Ondas stock's rally on Thursday is an opportunity to 'sell'

Ondas ONDS is soaring on Thursday morning amidst a sector-wide rally on reports of the Trump administration considering funding domestic drone companies.

According to The Wall Street Journal, the Defense Department is in discussions with several drone firms as Washington pushes to accelerate homegrown drone manufacturing capability.

Despite today’s surge, Ondas stock is down nearly 10% versus its year-to-date high.

Ondas stock’s rally is more hype than substance

Caution is warranted in chasing the momentum in ONDS shares because headline excitement now seems to be running ahead of the reality.

For starters, the Nasdaq-listed firm isn’t mentioned anywhere in the original WSJ report; it named Performance Drone Works, Unusual Machines, and Neros Technologies – but not Ondas Inc.

Ondas is riding the wave purely on sector association – not on any direct evidence it’s in line for a government cheque.

Simply put, the price action resembles a classic case of “guilt-by-adjacency” momentum trading, where a rising tide lifts all boats, albeit temporarily.

Investors loading up on Ondas at current levels are paying a premium for speculation that it could benefit from a program it hasn’t even been linked to.

And in small-cap defense names, that premium tends to evaporate quickly once the initial frenzy subsides.

Financials do not warrant buying ONDS shares

Strip away the headline and ONDS’ underlying numbers present real challenges that a drone-sector narrative alone can’t paper over.

While an 11x year-on-year increase in Q1 sales to just over $50 million sure was “impressive”, the growth was almost entirely acquisition-driven – Ondas has gobbled up six defense-tech names in 2026 alone.

More tellingly, the Q1 operating loss widened to $42.7 million, and management itself said adjusted EBITDA losses will remain rather elevated in the second quarter.

In fact, company-wide profitability isn’t expected until early 2028.

Additionally, ONDS is seeking shareholder votes at its annual meeting today to raise authorized common shares from 800 million to 1.2 billion – indicating further dilution ahead.

Technicals are just as unattractive

ONDS shares’ technicals aren’t particularly encouraging either.

The relative strength index (RSI) currently sits in the late 60s, indicating the stock is approaching “overbought” conditions – a setup that often triggers a sell-off.

Historically (over the past six years), Ondas has lost over 1% in June, a seasonal pattern that makes it even less attractive to own in the near-term.

Plus, ONDS traded below $1.0 as recently as a year ago – suggesting the easy money has already been made.

It’s now pricing in a great deal of execution on a $390 million full-year revenue target that depends on seamlessly integrating six acquisitions while converting a $457 million pro forma backlog into actual recognized sales.

Defense contractors, even excellent ones, routinely stumble on that kind of integration complexity.