Why This $6 AI Drone Stock Has an $11 Price Target (LTRX) (Lantronix Stock)

LTRX's $11 price target vs a $5.73 stock

0:00 On October 15th, 2026, Lantronix, ticker symbol L T R X, traded at about $5.73 a share, and six Wall Street analysts rated a buy with price targets of $10 to $12, roughly 88% above the price. That gap will undoubtedly get a drone stock some attention. However, you should know that two of the banks behind those price targets actually helped facilitate a sale of about 4.1 million shares for about $7.20 in May. So, that's something to keep in mind before you take those price targets as prophecy.

0:30 Just imagine Dan, our fictional mechanic who sells the little brain that helps the delivery robot find the right door. Everybody photographs the robot, but without Dan's part, it might confidently deliver your lunch to a hedge. And Dan gets paid either way, which is the whole reason the stock is interesting. My name is Blake, and today on 9:05 Investing, we're going to be talking about why Lantronix has an $11 price target, who is behind that price target, and the three things that I would check before actually believing that price target and investing.

1:00 This is an exciting episode where we're talking about the intersection between AI and drones. So, in the fiscal year that ended June 30th, 2026, Lantronix reported about $12.6 million of revenue from unmanned systems, which basically just means drones and robots that fly or drive themselves.

Lantronix's $12.6M drone business

1:17 That is not a forecast on a slide, that is actual real money that customers have paid Lantronix, and that is a lot better than you're going to get with most small cap AI stocks.

What Lantronix sells: edge AI inside the drone

1:25 So, what does Dan actually sell? Lantronix makes compact computers that go inside the machine, so a drone can look at its own camera feed and decide on board, which is what people mean by edge AI. The The thinking happens inside of the drone. Clear's customer is Teal Drones, a Redcat company, which announced on August 18th, 2025, that it selected Lantronix for production of its Black Widow drones under the Army's short-range reconnaissance program.

1:53 Think about it. Dan did not win the Army contract, Redcat did, but every Black Widow needs Dan's part, which is the appeal of being the supplier. You ride someone else's grow without the cost of being the drone company. But, before the kid on his phone sees Army Drone in a headline and taps buy, Lantronix does not say what it makes per drone, so you cannot take Redcat's program and assign it to the supplier. One customer is not a market, which is why October 1st, 2026 matters.

Blue UAS listing and the Spotter board

2:17 That is when the Open-Q 8550CS module made the Blue UAS framework, the Pentagon's list of drone parts vetted for government use. In Dan's world, that is like passing the inspection that lets you sell parts to the base. Except, passing the inspection fills out a form. It does not fill up an order book. That matters because of what came 12 days later. On October 13th, 2026, the company introduced Spotter, a small robotics platform on Qualcomm's QCS6490 chip that puts the AI processing, the cameras, and the vehicle controls on one board, planned to ship in the fourth quarter of this year.

2:54 Picture Dan's customer building a robot out of parts that do not talk to each other, spending every afternoon getting the camera to speak to the motor. Spotter is Lantronix's pitch to that guy. Here's the board, skip the afternoon. So, the pipeline goes Black Widow in production, a Blue UAS listing, and a new board shipping this quarter, which is why management said had more than 30 active unmanned system engagements at the end of fiscal 2026. An engagement is a conversation with a customer that might become a design win, which might become a production order, and only the last one of those puts cash in Dan's register.

3:25 The catch is in the same release.

The other 80%: revenue down 1.6%

3:27 Management expects unmanned systems to be 15-20% of total revenue in fiscal 2027, which sounds great until you remember that the other 80% is a company that shrunk last year. So, what did the whole company do in fiscal 2026, drones included? Total revenue of about 120.9 million dollars, down 1.6 from the year before. That is the part that the drone headlines leave out. Dan's robot brain business is growing, but the old stuff on the other shelves was shrinking faster than the new stuff was growing.

3:58 The good news is the finish because fourth quarter revenue rose 8% from a year earlier to about $31.2 million, and that is the quarter Needham was looking at when it reiterated its buy rating the next day on August 27th. But revenue is what you sold, and profit is what is left after everyone else gets paid.

Profit, cash and no debt

4:12 And for the full year, Lantronix reported a GAAP net loss of about $4.2 million. And GAAP is just the standard accounting rule book, so that loss counts everything. A small loss on $120 million of sales is not a disaster. And the company had no debt at June 30th, so nobody is charging an interest while it waits for the drone orders. The bigger cushion is cash. Lantronix ended the year with about $60 million, which sounds like a fortress until you read where a big chunk of it came from.

4:40 Annual report shows about $44.1 million of net proceeds from selling new shares during the year.

Dilution: the $7.20 share offering

4:45 And the piece you can see in the press releases is the May 29th, 2026 offering 4.1 million shares at $7.20, about 30 million before fees. Imagine Dan bringing a partner into the shop because he needs cash for inventory. The shop gets the money, the shop can grow, and Dan now owns a smaller slice of it than he did on Monday. That, my friends, is dilution, which basically just means the pizza got into more slices, and your slice is only worth more if the pizza grows faster than the slicing.

5:12 It's the part that I promised you towards the beginning.

The banks behind the price targets

5:16 The joint book runners on the $7.20 offering, the banks that sold those shares to investors were Needham and Canaccord Genuity. And on July 9th and August 27th of this year, Canaccord and Needham put out buy ratings on Lantronix with $11 price targets, which is $3.80 above the price they sold it at. That does not make the targets wrong, and it is not against any rule because underwriting and research are supposed to be walled off from each other.

5:42 But if your neighbor sold you a truck for 7.2 K and told you it was worth 11 K, you would at least want to know that he was the one selling it to you.

Who else covers LTRX

5:50 But who else is in the room? Lake Street raised its target to $10 on September 18th. Jones Trading started coverage in July at $12. Craig Hallum is at $10. UBS says buy and one sell is a letter grade from Weiss Ratings with no price target attached. That lines up as six buys, one sell, an average price target around $10.80 and a stock that was trading at $5.73 on October 15th. So the market is pricing in something very different from what their research notes are.

6:16 So what is the market pricing in? From what I can tell, the gap between an engagement and an order because programs move slowly, competitors win designs, and Dan's bills arrive every month whether or not the robot guy ever orders. Now the retiree who never sells says patient money wins here. The guy who is sure it all goes to zero says every drone stock is a fad and I think both of them are skipping the part where you actually check.

Cash flow and working capital

6:41 Which brings us to the operating cash flow. Lantronix reported about 9.9 million of it in fiscal 2026, which is a good number for a company that lost money on paper except the filing says working capital changes helped it. Working capital in Dan's shop is collecting an old invoice or selling inventory he already paid for. The bank balance goes up, but there is no identical check coming next month. Stated another way, some of that 9.9 million dollars is just timing and I would want to see a profitable three or four quarters before I could really say that Lantronix is a cash generating type of business consistently.

7:12 It honestly could have just been a lucky quarter.

3 checks before you trust the target

7:15 So here are my three checks for the next earnings report starting with whether Unmanned Systems revenue is actually climbing from that $12.6 million dollar base because the whole $11 price target rests on it. The second check is whether the rest of the company stopped shrinking because the 8% finish in the fourth quarter needs a second quarter behind it before it counts as a trend. And the third is the share count next to the cash because if the company raises money again at these prices, your slice gets thinner at a worse exchange rate than the $7.20 the last investors paid.

7:44 If those three things go right, the analyst looks smart and the $7.20 crowd gets their money back. If the orders slip and the share count keeps growing, a $10 target is just a number on a note from a bank that already got paid. Nobody can reliably predict which one it is.

Is the $11 price target a promise?

8:00 And the $11 is not a promise because a price target is just a prediction with a 20-month expiration date, not a contract. Dan's business is worth more when the robot guy is actually placing orders and Dan still owns enough of his company for him to actually care, not when he gets another photo of himself next to a robot. What would it take for you to trust a buy rating from a bank that just sold shares on behalf of the company? Tell me in the comments.

8:26 If you want to see how the same analyst math played out on a $2 AI stock with a $9 price target, watch Why This $2 AI Stock Has a $9 Price Target. It's a video about RZLV next.