DroneShield Ltd (ASX: DRO) shares may be up over 400% since the start of the year, but that doesn't necessarily mean that the run is over.
In fact, the team at Bell Potter believes the counter drone technology company's shares can still deliver outside returns for buyers over the next 12 months.
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What is the broker saying?
Bell Potter notes that the company has announced a major contract win in Latin America (LATAM) this week worth $25.3 million. This contract is significantly greater than all the previous contracts from this customer combined. It said:
DRO has announced a $25.3m contract from a defence end customer in a LATAM country. Delivery and payment is expected through 4Q25 and 1Q26. The order was received from a privately owned in-country reseller that is contractually required to distribute to a Government defence end customer in a LATAM country. DRO had previously received 7 standalone orders from this reseller between March 2019 and July 2025, totalling approx. $2.9m.
In light of this contract win, the broker has boosted its near term earnings forecasts materially and highlights that almost all its revenue estimate for FY 2025 is now accounted for. It adds:
We upgrade EPS +20% in CY25e reflecting a $10m increase in revenue following the LATAM contract award. We estimate that our $210m and $297m revenue forecasts in CY25/26e are 97% and 6% secured, respectively.
Favourable conditions
Another reason to be positive on the company's outlook is that drone incursions have continued in Europe, which emphasises the growing importance of counter drone technology. It said:
On 2/11/2025, drones were detected for a third consecutive night flying over the Kleine-Brogel military base in Belgium, adding to a growing pattern of drone incursions across Europe. These incursions highlight the need for counter-drone technology at military bases, airports and other critical infrastructure and, in our view, speeds up the signing process for European DRO contracts.
DroneShield shares tipped to rise
According to the note, broker has reaffirmed its buy rating and $5.30 price target on DroneShield shares.
Based on its latest share price of $3.83, this implies potential upside of 38% for investors over the next 12 months.
Commenting on its buy recommendation, the broker said:
We believe DRO has the market leading counter-drone offering and a strengthening competitive advantage owing to its years of experience and large R&D team, focused on detect and defeat capabilities.
We expect 2026 will be an inflection point for the global counter-drone industry with countries poised to unleash a wave of spending on soft-kill detect and defeat solutions. Consequently, we believe DRO should see material contracts flowing from its $2,550m potential sales pipeline over the next 3-6 months as defence budgets roll over to FY26.
