DroneShield Ltd (ASX: DRO) shares have been sold off this week.
Heavy insider selling appears to have spooked the market, dragging the counter drone technology company's shares deep into the red.
In fact, with the company's shares currently fetching $2.05, they are now down approximately 70% from the 52-week high they reached in October.
The team at Bell Potter is likely to see this as a compelling buying opportunity for investors based on a recent note.
What is the broker saying about DroneShield shares?
While Bell Potter hasn't responded to any of the company's updates this week, last week the broker reiterated its buy rating and $5.30 price target on DroneShield's shares.
Based on its current share price of $2.05, this implies potential upside of over 150% for investors between now and this time next year.
To put that into context, a $5,000 investment would turn into approximately $12,500 over the next 12 months if Bell Potter is on the money with its recommendation.
Why is Bell Potter so bullish?
Bell Potter believes that DroneShield is exceptionally well-positioned for growth in the coming years thanks to its market-leading counter-drone product portfolio.
It feels this should support significant contract wins over the next six months from its $2,550 million potential sales pipeline. It explains:
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.
Our 12-month price target on DRO is $5.30. In determining our price target we derive two DCF valuations which considers both a base case and bull case scenario and apply a weighting to each scenario to formulate a weighted average DCF valuation.
Strong sales and profit growth
Bell Potter is expecting DroneShield's sales to reach $210 million in FY 2025, before rising to $297 million in FY 2026 and then $377 million in FY 2027.
This is expected to underpin a net profit after tax of $28 million this year, then $50 million in FY 2026, and then $82 million in FY 2027.
