A Host of Applications Will Drive the Civilian Adoption of Drones...But Jeff Bezos’ Dream Is Still Far From Reality

Guild Investment Management |

Jeff Bezos, the CEO of Amazon.com (AMZN) , made a splash in December when he described his plan for Amazon deliveries to be made by drones. And not just any drones -- weird eight-winged “octocopters” resembling something from an alien attack.

Even if it was a publicity stunt, there’s a lot of truth in Bezos’ idea. Civilian drones have enormous potential applications, and it is likely that when the Federal Aviation Administration (FAA) finally clears the way, there will be a big growth opportunity for companies working in this space.

Applications: Agriculture

The FAA plans to come up with plans for the integration of drones into commercial airspace by September of this year, although they don’t expect that implementation to be complete until the end of the decade.

In the meantime, one of the key applications will be in agriculture. Japan, facing a blue-collar labor shortage that we described last week, has been an early adopter of robotic agriculture, now using helicopter drones as crop dusters on 40 percent of its rice crop.

We anticipate that agricultural drones in the U.S. will not only apply fertilizers, pesticides, and herbicides, but will be used to collect crop and weather data, which will then be crunched to determine optimal application and planting patterns.

Applications: Security and Surveillance

According to a report last year from an industry group, the Association for Unmanned Vehicle Systems International (AUVSI), the other big field for UAV applications besides agriculture is in security and public safety. Together, their analysts believe that agriculture and security account for 90 percent of the potential market for UAVs.

Security applications obviously include surveillance and law enforcement, but also firefighters, emergency response, and search and rescue operations. Anywhere it’s difficult or dangerous to insert a human crew to deliver equipment or assess conditions or collect data is an opportunity for the deployment of drones.

From Military to Civilian

Drone company AeroVironment (AVAV), which built 85 percent of the drones in use by the Defense Department, is strategizing a shift to civilian applications, and has been bullish on the prospects for some time. Their strategy in the 1980s identified the military as the likely first adopter of drone technology, but they have long pushed for drone use to expand to emergency services, law enforcement, and agriculture. AVAV’s smaller, lighter drones make a natural fit with a segue into commercial markets. (We are not recommending AVAV for investment.)

The technical experience gained during the war on terror, coupled with advances in artificial intelligence to allow for greater autonomy, mean that a new generation of commercial drones will be ready for deployment when the regulations open the doors.

[Image via Amazon]

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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