Why DroneShield shares could rise 70%

One leading broker thinks this stock could be heading significantly higher.

| More on:
Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

DroneShield Ltd (ASX: DRO) shares were on form on Wednesday.

The counter drone technology company's shares ended the session 4% higher at 64 cents.

This was driven by the release of its quarterly update and the announcement of a big new contract win in the Asia-Pacific region.

The good news is that one leading broker believes that there are plenty more gains to come and is urging investors to snap up shares while they can.

What is the broker saying?

According to a note out of Bell Potter, its analysts were a touch disappointed with the company's performance in FY 2024 but are very pleased with its "flying start" to FY 2025.

Commenting on its updates, the broker said:

DRO recorded full-year revenue of $57.5m (vs BPe $65.8m), representing YoY growth of just +6.3%, and a net loss of $(4.8)m (vs BPe net profit $6.4m). The operating cash outflow was $(57.9)m (vs BPe $(42.1)m) and DRO had a cash balance of $220.6 million as at 31-Dec-24 (vs $57.9m at 31-Dec23). The miss to BPe estimates can be largely attributed to the lower revenue and faster scale up of the business than we forecast, driving an increased cost base.

The key takeaway from the announcements, however, was the $47.8m in contracted revenue YTD, representing 83% of the CY24 result. This level of contracted revenue for CY25 was well ahead of expectations and includes the $11.8m Asia Pacific contracts, the $9.7m Latin American contract as well as a substantial number of contracts (~$26m) valued at <$5m, which are not released to the market.

In light of this, the broker continues to forecast revenue of $103.8 million in FY 2025. This represents an 80% increase year on year.

Bell Potter has also pencilled in a net profit after tax of $16.6 million for the year, which compares favourably to an estimated loss of $4.8 million in FY 2024.

DroneShield shares tipped to rise strongly

The note reveals that Bell Potter has responded to yesterday's updates by retaining its buy rating on the company's shares with a trimmed price target of $1.10 (from $1.20).

Based on its current share price of 64 cents, this implies potential upside of 72% for investors over the next 12 months.

The broker concludes:

Whilst DroneShield's performance over the last 12-months did not meet expectations, the near-term outlook is considerably more positive. The value of contracts received YTD (~$47.8m) is evidence of increased levels of customer activity and DRO is well placed to meet this demand having materially increased the scale of its operations and heavily invested in its inventory levels. We retain our BUY recommendation.

Motley Fool contributor James Mickleboro 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.

More on Technology Shares

Accountant woman counting an Australian money and using calculator for calculating dividend yield.
Technology Shares

Which ASX 200 technology stock will pay the best dividend yield in 2025?

Earnings season is underway and dividend announcements are on investors' minds.

Read more »

A young man talks tech on his phone while looking at a laptop. A financial graph is superimposed across the image.
Share Market News

Here's how the ASX 200 market sectors stacked up last week

ASX 200 technology stocks led the market with a 1.99% rise while the benchmark index slipped 0.24%.

Read more »

A man sits in casual clothes in front of a computer amid graphic images of data superimposed on the image, as though he is engaged in IT or hacking activities.
Technology Shares

2 ASX tech stocks to buy during an anticipated 15% to 20% sector pullback in 2025

Expert reveals 2 of his favourite tech stocks and at what prices we should buy them during a dip.

Read more »

A man leans forward over his phone in his hands with a satisfied smirk on his face although he has just learned something pleasing or received some satisfying news.
Technology Shares

Life360 shares: A generational opportunity to get rich?

I think the Life360 share price could more than double again in the year ahead.

Read more »

a woman sitting at a desk checks an old fashioned calendar resting against her wall as she sits with documents in front of her.
Technology Shares

Own WiseTech shares? You need to know about these dates in 2025

Put these dates in your calendar.

Read more »

a young child wearing a cardigan and thick black glasses places his hand on a nearly rounded object and his hair lifts at right angles to his head thanks to static electricity.
Technology Shares

Up 223% in a year, why this ASX 200 tech stock could keep surging higher in 2025

A leading expert expects the ASX 200 tech company to provide strong 2025 earnings guidance.

Read more »

Man with rocket wings which have flames coming out of them.
Technology Shares

Pro Medicus shares jump to record high on big news

This high-flying stock keeps breaking records. Here's what is happening today.

Read more »

man thinking about whether to invest in bitcoin
Technology Shares

Should you buy WiseTech shares before earnings season?

Is this tech star a buy? Let's see what analysts are saying about it.

Read more »