Why are ASX investors so excited by the DroneShield share price?

Investors are bullish on this niche operator.

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The DroneShield Ltd (ASX: DRO) share price surged to an all-time high in trading on Monday, nudging $1.25 per share.

It opened trading around 1% higher on Tuesday and is currently swapping hands at $1.26 apiece. This brings the counter-drone technology company's return to a staggering 240% this year to date.

It's not often you see triple-digit returns in the first half of a year. So, what's driving this excitement among investors to cause such a feeding frenzy?

CEO Oleg Vornik on growth and strategy

CEO Oleg Vornik has provided valuable insights into DroneShield's strategic positioning and growth potential.

Speaking on a podcast hosted by Frazis Capital Partners, Vornik was questioned about the potential for a "five-year pathway to $300 to $500 million a year" in the company's revenues. This is a 10-fold increase from the company's $55 million revenues last year.

Vornik said the industry's inflection point is when "customers have completed their certifications and trials; they know what they want; and need much more than what they currently have."

"[W]e're looking at the the market and we're saying okay well customers need to buy 100 times more than what they purchased just because of [the] market situation…".

This includes both military applications, but also the civilian markets, the counter-drone company CEO said.

Vornik also highlighted the company's advantage in the hand-held category of the drone detection market. "We believe that there are no other credible providers to the US military right now" he said, adding it had "outperformed" other competitors in trials.

Contract wins helping DroneShield share price

DroneShield's share price has been soaring in 2024 thanks to a number of catalysts.

Recently, the DroneShield share price spiked following a substantial $5.7 million repeat order from a United States government customer.

According to my colleague James, this order involves delivering DroneShield's advanced Counter-UxS systems, which target drones across multiple terrains—air, ground, and maritime.

The company expects to complete these deliveries in stages throughout the remainder of 2024.

Growth is a key ingredient in this recipe as well. In its most recent results, the company reported $16.4 million in quarterly revenue – a staggering 900% increase from the prior corresponding period.

Analysts have taken note of this strong performance. Bell Potter recently upgraded the DroneShield share price to a buy and $1.00 price target. This week's price action has subsequently taken this target out.

The broker forecasts $97 million in sales this year against earnings of $24.4 million. If DroneShield hits these numbers, it will be another tremendous growth period— up 80% and 163% year over year, respectively.

Droneshield share price looking ahead

DroneShield's strategic positioning in the counter-drone technology market could be another factor exciting investors.

Referring again to the handheld market, Vornik said it's "the biggest, because it's relatively cheap".

Plus, it removes many hurdles for customers. "You don't need integration", he says. "In the military space, integration is a big headache because…you have these high thresholds".

With DroneShield, you can "just invite your local it guide to plug a few cables in everything talks in different way", he added.

"So no integration is actually really positive".

The company's sales pipeline is $519 million with $27 million of orders under contracted backlog. In my opinion, this is robust.

Conclusion

With growing financials, substantial contract wins, and a promising sales pipeline, DroneShield has caught the bid lately.

In the last 12 months, the DroneShield share price has rallied 400% into the green, outpacing the S&P/ASX 200 Index (ASX: XJO) by more than 392%.

Motley Fool contributor Zach Bristow 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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