Two high-flying ASX shares: One upgraded, one downgraded

One of these high-flying shares could keep rising and one could fall.

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Two ASX shares that have made their shareholders smile this year are DroneShield Ltd (ASX: DRO) and Telix Pharmaceuticals Ltd (ASX: TLX).

Since the start of the year, their shares have risen by approximately 120% and 50%, respectively. As a comparison, the Australian share market is up around 0.5% over the same period.

However, one leading broker believes that one of these high-flying ASX shares could have peaked for the time being. This has led to its analysts downgrading its shares to a hold rating.

The good news for the other share is that its analysts have gone the other way with it. Despite its very strong gains, the broker has upgraded it to a buy rating from hold this week.

Which ASX shares have been downgraded?

According to a note out of Bell Potter, its analysts have downgraded Telix Pharmaceuticals' shares to a hold rating with a $14.50 price target. This implies a potential downside of 5% from its current share price of $15.24.

While the broker is a big fan of the radiopharmaceuticals company, it feels that its valuation is full. Particularly given that there are significant clinical risks on the horizon. Commenting on the downgrade, its analysts said:

The short term outlook for revenue growth from the diagnostic assets remains attractive, nevertheless the major inflection points for TLX591 in the treatment of prostate cancer are close and carry significant clinical risk. We expect a readout on the important efficacy measure of progression free survival within the next 2 to 3 months. A poor clinical readout has the potential to materially impact the share price and accordingly we downgrade from Buy to Hold on the basis of valuation, noting this is the first recommendation downgrade since our initiation coverage in 2021. PT remains $14.50.

DroneShield upgraded

On the same day, the broker upgraded this counter drone technology company's shares to a buy rating with a $1.00 price target. Based on the current DroneShield share price of 83 cents, this implies a potential upside of 20% for investors.

The broker made the move following a pullback in its share price in response to a recent capital raising. It feels this funding leaves DroneShield well-positioned to capture the increasing demand for its technology. It explains:

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.

Motley Fool contributor James Mickleboro has positions in Telix Pharmaceuticals. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended DroneShield and Telix Pharmaceuticals. The Motley Fool Australia has recommended Telix Pharmaceuticals. 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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