Up 120% in 2024, is it too late to buy DroneShield shares?

A leading broker has just upgraded this high-flying stock.

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DroneShield Ltd (ASX: DRO) shares have been on a sensational run in 2024.

Since the start of the year, the counter drone technology company's shares have risen 123%.

To put that into context, a $10,000 investment at the very end of last year would now be worth $22,300.

Impressively, these strong gains have been recorded despite the company undertaking (and completing) a $100 million institutional placement recently.

Can DroneShield shares keep rising?

The good news is that it may not be too late to buy this rapidly growing company's shares.

That's the view of analysts at Bell Potter, which have just upgraded its shares to a buy rating from neutral with a $1.00 price target.

So, with DroneShield shares currently fetching 82.5 cents, this implies a potential upside of 21% for investors over the next 12 months.

Commenting on the recent capital raising, the broker said:

DroneShield has successfully completed a A$100m fully underwritten placement, with the proceeds primarily to be invested in a build-up of its inventory to capitalise on robust global demand and a growing sales pipeline. Specifically, the company will allocate $31m to Handheld detection systems, $31m to Handheld defeat systems, $17m to On-The-Move systems, $1m to Fixed site systems and $10m to further investment in AI/ML.

In light of the above, the broker believes DroneShield is positioned perfectly to benefit greatly from the increasing demand for counter drone technology. It adds:

DroneShield is now well placed to capitalise on the growing demand for C-UAS solutions in response to current global tensions and the evolution of modern warfare. Our forecasts likely remain conservative relative to the current sales pipeline, however the risk of government delay remains prevalent in contracts of this nature. With the SP now trading near the issue price, we upgrade our recommendation to BUY.

Profit forecast

Bell Potter is forecasting revenue of $97.4 million and a net profit after tax of $24.2 million in 2024. This will be an 80% and 163% increase, respectively, over the prior corresponding period.

After which, the broker has pencilled in revenue and net profit of $122 million and $34.7 million in 2025, and then $149.5 million and $45.6 million in 2026.

Based on the latter, DroneShield shares are currently trading at a reasonably modest 14.6 times estimated FY 2026 earnings despite their impressive gains so far this year.

All in all, Bell Potter believes this makes it a great option for investors today.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended DroneShield. The Motley Fool Australia has no position in any of the stocks mentioned. 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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