The Droneshield Ltd (ASX: DRO) share price has slumped 4.92% in afternoon trade on Thursday. At the time of writing, the shares are trading at $3.96 each.
The counter-drone technology developer has been benefiting from tailwinds from a substantial increase in global defence spending. This is amid geopolitical tensions between the US, China, and Russia.
The company's shares have rocketed higher over the past year and reached an all-time peak of $6.60 per share in early October.
But now, the tables have turned, and over the past 3 weeks, the shares have shed 39.85%.
And now many are asking, is the sinking share price a signal to sell up? Or are Droneshield shares still a buy?
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What's happened to Droneshield shares?
In mid-October, a market meltdown on Wall Street spooked some investors. But other than that, there hasn't been any significant news out of the company this month to explain the sell-off.
In fact, the company's latest updates have only been positive. Droneshield launched a new software platform two weeks ago, and it's already made a sale.
The company told the ASX in a statement earlier this month that it had launched the DroneSentry-C2 Enterprise (C2E) platform. The new platform is able to connect multiple DroneSentry-C2 solutions across geographically dispersed sites.
Later on 20 October, the company posted a record 1,091% increase in quarterly revenue, to $92.9 million. Its cash receipts were up 751% on last year, and its Saas revenue swelled by 400%.
The absence of any real news to explain the tumbling share prices suggests that the downturn might have been caused by investors taking their profits from the strong gains of the past year.
What do analysts think?
According to TradingView data, analysts are positive that there is more upside to come for the ASX defence stock.
There is a strong buy consensus for Droneshield shares, and the data also shows a potential maximum upside of $5.30. That represents a potential 34.86% upside over the next 12 months, at the time of writing.
Bell Potter is one such broker with a buy rating and $5.30 target price on the shares. The broker recently commented that it thinks the tech defence company is well-placed to convert a chunk of its sales pipeline thanks to its exposure to a booming market.
And my view?
As a business, Droneshield is well-positioned to benefit from a substantial boom in growth over the next 12 months and beyond. The current share price dip looks to be investors selling up and taking profits at a time when the stock was surging to all-time highs.
As billionaire investor Warren Buffett says, the focus should be on picking the business, not the stock. All too often, investors panic and act irrationally in times of chaos or record highs. But in my view, this latest sell-off looks like a great buying opportunity for investors to get into the ASX defence stock before it heats up again.
