Now could be the time to snap up DroneShield Ltd (ASX: DRO) shares.
That's the view of analysts at Bell Potter, which have responded very positively to its second quarter update.
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What is the broker saying?
Bell Potter was impressed with DroneShield's performance during the second quarter and highlights that its cash flow was ahead of expectations. It said:
DroneShield (DRO) has released its Q2 update and Appendix 4C, which detailed an improved flow result ahead of our expectations. The company recorded Q2 revenue of $38.8m (+480% vs pcp) and $72.3m (+220% vs pcp) for the 1H, largely in-line with our 1H forecast of $71.3m (+1%).
DRO delivered an improved cash flow result, with a 1H operating cash outflow of -$4.4m (BPe -$25.5m) and investing cash outflow of -$11.9m (BPe -$16.7m) both ahead of our expectations, which was largely driven by higher customer receipts and lower inventory than forecast. The company had a cash balance of $203.7m as at 30-Jun-25.
Bell Potter also highlights that the company has already secured approximately 90% of its revenue estimate with five months left of the year. And given its huge sales pipeline, it appears to be just a matter of time until it achieves 100% of its estimate. The broker said:
DRO is well positioned to continue its strong performance having secured $176.3m in revenue for delivery in CY25 at 22-Jul-25, which represents ~90% of our full-year forecast ($195.4m), and a cash balance of $192m at 24-Jul-25. The company has identified a robust sales pipeline of $2.3b, with the majority of opportunities relating to Europe (43%) and the US (29%).
DroneShield shares upgraded
According to the note, the broker has upgraded DroneShield's shares to a buy rating with a $3.80 price target.
Based on its current share price of $3.17, this implies potential upside of approximately 20% over the next 12 months.
Commenting on its upgrade, the broker said:
DRO's strong 1H results (unaudited), high-level of contracted revenue ($176.3m) and recent share price pull-back provides us with increased confidence in its near-term outlook and, in our view, a more attractive entry point. Our unchanged price target of $3.80 is a >15% premium to the current share price so we upgrade our recommendation to BUY.
All in all, this could make DroneShield shares worth considering if you are looking for some exposure to the defence sector.
