DroneShield Ltd (ASX: DRO) shares have been on fire again this month.
So much so, despite a sharp pullback on Thursday, the counter drone technology company's shares are up 90% since this time last month.
But where's next for this high-flying share? Let's see what Bell Potter is saying about the company.
Where next for DroneShield shares?
Unfortunately, the broker believes that the company's shares are close to peaking, at least for the time being.
But before we get onto that, let's just see what Bell Potter makes of recent news that has put a rocket under DroneShield's shares. It said:
Recent contract wins: Since the $61m order announced on 25-Jun-25, DRO has received an additional $9.7m contract from a LATAM customer and a follow-on 2-year $11.7m R&D contract with a Five Eyes Department of Defence. We estimate DRO has approximately ~$175m in contracted revenue for delivery in CY25.
R&D and Manufacturing capacity expansion: DRO is investing $13m via a multiyear lease and fit-out commitment into an additional Sydney facility, expected to open in Dec-25. This will expand its annual production capacity to $900m by mid 2026 with an intention to increase this further through the utilisation of contract manufacturers in the US and Europe.
This has led to the broker making a material increase in its revenue estimates (and also its costs) for the coming years. It adds:
These updates have influenced our forecasts two-fold, 1) we have pushed up our longterm revenue forecasts with the major expansion a leading indicator of increasing customer demand, and 2) we have materially increased our operating expenses as DRO continues to rapidly scale its operations quicker than we anticipated.
Downgraded to hold
In light of the strong gains that have been recorded this year, Bell Potter believes that DroneShield's shares are now about fair value.
This morning, the broker has downgraded its shares to a hold rating (from buy) with a price target of $3.80 (from $2.60).
Based on its current share price of $3.51, this implies potential upside of approximately 8.3% over the next 12 months.
Commenting on the downgrade, Bell Potter said:
Listed peers in the drone/counter-drone sectors have undergone major re-ratings both domestically (ELS, EOS) and internationally (AVAV, KTOS), however, whilst we are bullish on the sector and view DRO as a market leader, the downside risk is prevalent at the current valuation. At our upgraded multiples of 65x PE and 40x EV/EBITDA, our updated PT of $3.80 is a <15% premium to the SP so we downgrade to HOLD.
