DroneShield Ltd (ASX: DRO) shares had a sensational start to the week on Monday.
The counterdrone technology company's shares jumped 16% to $1.03.
Why did DroneShield shares rocket?
Investors were scrambling to buy the company's shares following the announcement of major contract wins.
DroneShield revealed a new package of five standalone repeat contracts valued at $32.2 million, with delivery and payment expected through the second and third quarters of calendar year 2025.
This comes on top of $52 million in already contracted revenue, bringing DroneShield's 2025 delivery pipeline to at least $84 million. This is well above the $57 million in revenue recorded in 2024.
The team at Bell Potter was impressed and believes it is a sign that customer demand is re-accelerating.
As a result, the broker has increased its revenue forecasts by 21% for 2025, as well as lifted forecasts by 13% for both 2026 and 2027.
The good news is that this has also led to a sharp lift in earnings expectations, with earnings per share (EPS) forecasts jumping 68% in 2025, followed by 27% and 18% gains in the following years.
Strong tailwinds
More good news for owners of DroneShield shares is that there are strong tailwinds building thanks partly to US President Donald Trump. Bell Potter said:
The EU has announced a plan to "rearm Europe" worth €800b, including a €150bn loan scheme and changes to fiscal rules that could unlock €650bn in spending. Whilst the UK has committed to a sustained increase in defence spending to reach 2.5% of GDP by 2027 (2.36% 2026), with an ambition to reach 3%.
Drones a priority in Trump defence budget: President Trump recently announced he plans to increase the US defence budget to >$1 trillion USD. Whilst the Pentagon has identified certain priority areas, including drones and counter-drone.
Time to buy
In light of the above, Bell Potter has retained its buy rating on DroneShield shares with an improved price target of $1.30 (from $1.10).
Based on its current share price, this implies potential upside of 26% for investors over the next 12 months. It concludes:
Current industry tailwinds and DRO's strong performance YTD gives us confidence that customer activity is increasing following a brief pause around the US election last year. As such, we have increased our revenue forecasts by 21%/13%/13% in CY25/CY26/CY27 which drives EPS upgrades of 68%/27%/18% in the same periods. We retain our BUY recommendation.
