Would I be crazy to buy DroneShield shares now at over $2?

After soaring more than 700% in a year, can DroneShield shares keep flying high?

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DroneShield Ltd (ASX: DRO) shares have been shooting the lights out over the past year.

Despite a 0.93% retrace yesterday to $2.13, shares in the All Ordinaries Index (ASX: XAO) drone defence company are up an eye-watering 719% over 12 months.

Yep, that's no typo.

To put this blistering performance in perspective, this will have turned a $5,000 investment into $40,962.

In one year.

But with DroneShield shares having now leapt from 26 cents to more than $2, would I be crazy to buy?

Let's dig in.

What's been sending the ASX drone defence stock to the moon?

ASX investors have been sending DroneShield shares flying higher amid ongoing and rising global tensions.

As we've seen over the last year in hotspots including Ukraine and the Middle East, drones are quickly gaining traction in military conflicts, as well as posing increasing threats to civilian infrastructure, prisons and airports.

With the AI revolution in full swing, the threats posed by ever-increasing autonomous drones are only likely to grow. And the demand for AI-enabled drone defence capabilities is likely to grow alongside those threats.

The last 12 months has seen DroneShield tap into that growing defence demand, inking a series of multi-million dollar contracts with government agencies across the globe.

And this has led to some smashing financial results.

On 15 April, the company reported record first-quarter revenues of $16.4 million, up a whopping 900% from the $1.6 million reported in the prior corresponding quarter.

In its quarterly results, the company also reported having a $27 million contracted backlog and a sales pipeline of over $519 million.

DroneShield shares closed up 11.1% on the day at 95 cents a share.

And shares have kept charging higher from there.

Most recently, on 20 June, shares hit another all-time closing high after the company reported on a $4.7 million order from a new non-government Swiss international customer to provide multiple vehicle-based counter-drone (C-UxS) systems.

So, would I be crazy to buy DroneShield shares at more than $2 apiece?

I think not.

Among the tailwinds that could continue to see it grow are the potential threats and accompanying defence capabilities posed by AI technology.

Commenting on that potential following the $4.7 million C-UxS systems sale on 20 June, DroneShield CEO Oleg Vornik said:

This order highlights DroneShield expertise not only as a maker of cutting-edge AI-based C-UAS sensor and effector technologies, but also a system integrator, for demanding applications that involve multiple sensor and effector modalities, operating in tough conditions. 

What are the experts saying about DroneShield shares?

Turning to what the experts are saying about DroneShield shares, in mid-June, Frazis Capital founder Michael Frazis noted:

DroneShield recorded revenues of $55 million in 2023, more than triple the $17 million in 2022. 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.

The fund managers at Tamim Asset Management are also bullish on the outlook for DroneShield shares, recently stating:

In the most recent quarterly report, DroneShield reported incredible financial results for the first quarter of 2024, with revenue growing 10 times year-over-year and a significant increase in order intake.

As the threat of drone-related incidents continues to rise, DroneShield is well-positioned to capitalise on the increasing need for effective counter-drone technologies.

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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