DroneShield Ltd (ASX: DRO) shares have been on a rollercoaster ride that is starting to resemble a topographical map of the Great Dividing Range.
The counter-drone technology business is currently trading at 72.8 cents, down 29% over the past month, as investors push the stock to its lowest levels in three months.
On analysis, the company has faced setbacks, including weaker-than-expected revenue growth and a blow from the expectations embedded in its stock price earlier this year.
Despite this, analysts remain divided on whether DroneShield shares represent an opportunity or a cautionary tale for investors. Has the stock fallen out of vogue? Let's see what the experts think.
What's driving DroneShield shares?
DroneShield shares have been heavily sold in the past three months, with a few catalysts behind the selling.
First was its third-quarter results. These highlighted both strengths and challenges.
On the upside, quarterly cash receipts hit an all-time high of $9.1 million, up 18% year on year. It has collected north of $30 million in cash from customers so far this year, a 20% increase.
However, revenues for the year to date of $31 million were down 20% compared to last year.
This was largely due to the absence of a one-off $33 million contract from FY23, which made the comparisons difficult. DroneShield shares were still impacted.
To address the shortfall, DroneShield highlighted that it delivered or has scheduled $24 million in products for Q4.
If it included these, management says total revenue for FY24 would stand at $55 million — now we are talking. The company also has $1.1 billion in its sales pipeline.
But as I say, markets, like Shakira's hips, don't lie. So when DroneShield missed revenue expectations, it's not surprising that shares were marked lower as a result.
What are brokers saying?
Analyst opinions remain mixed. Bell Potter has upgraded DroneShield to a buy rating, albeit with a reduced price target of $1.20.
This is down from $1.35 previously. The broker cited the recent selloff in DroneShield shares as a potential buying opportunity.
It points to the $18 million in contracted revenue the business has for 2025, combined with global demand for counter-drone technology.
But Bell Potter also tempered its earnings expectations, slashing earnings forecasts for 20224 by 57% due to increased operating expenses.
According to CommSec, both brokers (including Bell Potter) rating DroneShield shares currently recommend it as a buy.
Foolish takeaway
DroneShield shares are at a crossroads, in my view. While the company has growth potential in the counter-drone market, its financial results have weighed on investor confidence.
In the last 12 months, the Droneshield share price is up 117%.
