The DroneShield Ltd (ASX: DRO) share price was in fine form on Wednesday and recorded yet another impressive gain.
The counter drone technology company's shares ended the session 20% higher at $2.14.
This was driven by news that the high-flying company has received its single largest order in its history.
In light of yesterday's gain, DroneShield's shares are now up a whopping 185% since the start of the year.
Does this mean that its shares have now peaked, or can they keep rising? Let's see what one leading broker is saying.
Can the DroneShield share price continue to soar?
Bell Potter was impressed but not overly surprised with the company's announcement. It said:
DroneShield has announced a package of three standalone follow-on contracts for a European military customer valued at $61.6m. Delivery of the entire package of handheld detection and counter-drone systems is expected during Q3 CY25, with payments in Q3 and Q4. DRO's ability to rapidly fulfil a contract of this size is a key competitive advantage in the defence sector and a reflection of the company's significant inventory investment over the last 18-months.
The broker also points out that this means that DroneShield's performance year to date is absolutely smashing the prior corresponding period. It is also comfortably ahead of its own expectations. It explains:
DRO recorded Q1 revenue of $33.5m (+102% vs pcp), including SaaS revenues of $1.7m (+198% vs pcp), and cash receipts of $16.7m (+135% vs pcp). We anticipate the company to deliver 1H25 revenue of ~$70m (+206% vs pcp), which will exceed the entirety of CY24 revenue ($57.5m). Following this contract announcement, DRO has $161m in contracted revenue to be delivered in CY25, exceeding our current full-year estimate of $140m.
In light of the above, the broker believes it isn't too late to buy DroneShield shares.
Price target upgraded
According to the note, Bell Potter has reaffirmed its buy rating and lifted its price target on the company's shares materially to $2.60 (from $1.50).
Based on the current DroneShield share price of $2.14, this implies potential upside of 21.5% for investors over the next 12 months.
Commenting on its recommendation, the broker said:
We have made material upgrades to our revenue forecasts on the basis of 1) contracted revenue YTD, 2) increasing scale and frequency of contracts, and 3) industry tailwinds, specifically global commitments to increased military expenditure. Our revenue upgrades are +40%/+38%/+36% in CY25/CY26/CY27.
We remain positive on the outlook for DRO and are comfortable with the current valuation based on 1) forecast earnings growth, 2) increasing scale/frequency of contracts, 3) industry tailwinds and 4) strong re-ratings across the defence sector.
