DroneShield Ltd (ASX: DRO) shares are slipping today.
Shares in the S&P/ASX 300 Index (ASX: XKO) drone defence company closed Friday at $1.215. At the time of writing, they are changing hands for $1.207 apiece, down 0.7%.
For some context, the ASX 300 is up 0.3% at this same time.
This sees DroneShield shares down 14% over the past week, compared to a 0.6% weekly gain posted by the ASX 300.
Don't feel too badly for longer-term shareholders though. As you can see on the chart above, DroneShield shares remain up a blistering 364% over 12 months.
Which may make today a good time to take some profits.
Are DroneShield shares overvalued?
Red Leaf Securities' John Athanasiou believes ASX investors would do well to consider selling their DroneShield shares and reinvesting in companies with better opportunities.
"The company provides artificial intelligence-based platforms for protection against advanced threats, such as drones and autonomous systems," Athanasiou explained (courtesy of The Bull).
"The shares have risen from 38 cents on January 2 to trade at $1.28 on October 10," he added of the rocketing share price.
As for the company's recent performance, Athanasiou noted, "First half revenue from continuing operations rose 108% in 2024 when compared to the prior corresponding period. But the company's net loss was up 64%."
And that could mean investors have been overexuberant in bidding up DroneShield shares to current levels.
"In our view, the stock is overvalued, with the market pricing in too much optimism. We see better opportunities elsewhere," Athanasiou said.
What else do we know about the company's half-year results?
DroneShield shares closed down 8.2% on 27 August, the day the company released its half-year results, only to surge 9.8% the following day.
As noted above, revenue was up strongly year over year, notching a six-month record. But that wasn't enough to stem the company's increased half-year net loss.
As for the balance sheet, the ASX 300 drone defence stock reported a cash balance of $230 million with $32 million in contracted backlog.
Management also pointed out that the second half of the year "has traditionally been a stronger period for the company, with the 2H23 being 79% of the total FY2023 revenues".
And the company said DroneShield shares are well-placed to keep growing.
Management noted:
DroneShield continues to be in a highly favourable environment, with both the counter-drone industry rapidly growing and more generally defence and security budgets rising. The company has a number of unique differentiators (technically and commercially).
