40% of Wall Street Is Betting Against This Little-Known Defense Stock. Here's Why They Might Be Wrong.

Ondas (ONDS) just acquired Cyberhawk, a drone inspection company that uses AI to check critical infrastructure like power lines and pipelines. The deal cost about $125 million, mostly in cash, and ONDS stock rose roughly 4% after the news. It's the latest in a long run of purchases that has reshaped Ondas from a small drone maker into a much bigger defense and infrastructure business. In the past month, the stock price has increased 29%, and many are now betting against the company.

ONDS currently has a massive short interest of around 40%. That is an unusually large bet that the stock will fall. What's worth understanding is why. The demand is solid, and the bet against the company is primarily about two other things.

Shaq Says His Dad Treated Him to White Castle, But When He Saw Homeless Man With a Sign, He Gave 3 of His Burgers to the Guy — 'Always Look Out for the Little Man'

Micron vs. SK hynix: One Stock Rules AI Memory. The Other Has More Room to Run.

Rocket Lab Investors Have Plenty to Cheer Ahead of Q2 Earnings Today

Get exclusive insights with the FREE Barchart Brief newsletter. Subscribe now for quick, incisive midday market analysis you won't find anywhere else.

The first is dilution. Ondas has paid for its shopping spree largely by issuing stock and raising money through share sales, including a roughly $1 billion equity offering. Every new deal risks adding more shares, which reduces the value of shares for the company's existing shareholders. The second is conversion. Ondas is sitting on a backlog of more than $450 million in orders, but it has been slow to turn that backlog into actual revenue. The bears are betting the gap between the promise and delivery stays wide.

Here's why I believe the bulls have just as strong a case, if not stronger. The company pulled in over $150 million of orders in the second quarter. Defense giant Lockheed Martin (LMT) is incorporating Ondas technology into one of its own systems. Moreover, management has raised its 2026 revenue target to at least $525 million. The business is bigger and more validated than it has ever been, yet ODNS stock trades at about 9.9x sales, roughly a third of its 5-year average. For a company whose fundamentals have been improving, that is a considerable discount. CEO Eric Brock said the focus now is on "efficiently converting that backlog into customer deliveries, revenue growth and cash flow generation." Its earnings on Aug. 13 are the next test of exactly that. A strong showing would put real pressure on the 40% of the float betting the other way.