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Why the DroneShield (ASX:DRO) share price shot up 10% today

Drone hovering in the sky indicating a share price gain in drone technology
Source: Droneshield Prospectus

The DroneShield Ltd (ASX: DRO) share price is climbing higher after announcing a new research & development (R&D) contract today.

In mid-morning trade, shares in the defence contractor shot up 10.5% to a high of 21 cents, before retreating slightly to 20 cents at the time of writing. In comparison, the All Ordinaries Index (ASX: XAO) is flat at 6,617 points.

Let’s take a look at what exactly is fuelling the DroneShield share price rise.

New contract win

DroneShield advised that it received an R&D contract related to its artificial intelligence/machine learning algorithms.

The company did not reveal which country placed the order, but said that it was from a defence department of a ‘Five Eyes’ country. The term ‘Five Eyes’ relates to a signals alliance between the United States, Canada, Australia, the United Kingdom, and New Zealand.

The deal is expected to be worth approximately $600,000 with a performance period that runs through to mid 2021. In the contract, defence applications include artificial intelligence capabilities providing a military advantage to adversaries.

DroneShield said the order did not include any of its counter-drone technology.

What did the CEO say?

Commenting on the contract, DroneShield CEO Oleg Vornik said:

This ground-breaking contract expands DroneShield beyond being a pioneer and global leader in the C-UAS domain, and into the artificial intelligence/machine learning space within the defence sector.

The contract leverages off the cutting-edge AI capabilities that DroneShield has developed within its C-UAS products, applying it to wider defence applications. Further, this contract creates a trusted dialogue with this specific high-profile defence customer, allowing us to more deeply understand their requirements and provide them with solutions to address their needs.

What does this mean for the DroneShield share price?

Most recently, the DroneShield share price has been gaining traction following a raft of positive market updates. It was only last month that the company received a government order for its DroneGun Tactical hand-held counter-drone products. And weeks before the contract win, DroneShield bagged an order for its DroneSentry system to a Southeast Asian nation.

Since the start of September, the DroneShield share price has shot up from 13.5 cents to today’s price of 21 cents. This represents a gain of 55%.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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