Why the 'opportunity is immense' for DroneShield shares: fundie

DroneShield's 480% one-year share price gains may be just the beginning, according to this top fundie.

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DroneShield Ltd (ASX: DRO) shares are taking a fall today in what could present an opportune buying opportunity.

Shares in the All Ordinaries Index (ASX: XAO) drone defence company closed on Friday trading for $1.455. During the Monday lunch hour, shares are changing hands for $1.42 apiece, down 2.75%.

For some context, the All Ords is down 0.09% today.

But you're highly unlikely to hear any longer-term shareholders complain about today's underperformance.

As you can see on the chart above, DroneShield shares have been on fire over the past year. Despite today's retrace, shares remain up 480% over 12 months and are up 266% in 2024 alone.

To give you a better idea of just what that means, if you'd invested $5,000 in the company this time last year, you'd now be sitting on $29,000.

Not bad!

And the tremendous growth run for this booming ASX tech stock may have a lot further to go.

Why DroneShield shares could keep on booming

Frazis Capital founder Michael Frazis looks for top technology stocks with the potential for explosive share price growth.

And he believes DroneShield shares fit that bill.

 "DroneShield recorded revenues of $55 million in 2023, more than triple the $17 million in 2022," Frazis said (quoted by The Australian Financial Review). "And analysts forecast 2024 revenues of over $90 million, with the bulk coming from high margin defence contracts."

"The opportunity is immense. Less than 1% of infantry units, ships, military bases, and civilian targets are protected against low-cost drones," Frazis added.

What's been going right for the ASX All Ords tech stock?

DroneShield shares have been among the biggest beneficiaries of the increased conflicts and accompanying sabre rattling we're witnessing across the globe.

And the rapid advancement of AI technology is only likely to increase the threats that drones can pose to military and civilian personnel and infrastructure. Meaning the demand for ever-better defence systems to protect against those evolving threats is likely to keep growing as well.

Indeed, as Frazis points out, only a tiny fraction of potential targets are currently protected by anti-drone measures.

And the growth potential of DroneShield shares has certainly grabbed investor attention.

On 18 April DroneShield announced it had completed its share purchase plan (SPP), which was capped at $15 million. Had it not been capped, the company would have raked in $40 million.

As the company reported on the day:

The SPP generated significant support from DroneShield's existing shareholders and applications received substantially exceeded the maximum capped raising amount of $15 million set by the company, with DroneShield receiving total applications for fully paid ordinary shares for $40 million.

Motley Fool contributor Bernd Struben 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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