Electro Optic Systems Holdings Ltd (ASX: EOS) shares are starting the week positively.
In morning trade, the ASX defence stock is up 6% to $5.08.
This compares favourably to the performance of the ASX 200 index, which is down 0.5% to 8,592.8 points.
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Why is this ASX defence stock jumping?
Investors have been bidding the company's shares higher on Monday after it made a big announcement before the market open.
According to the release, Electro Optic Systems has secured a new order for its Slinger Counter-Drone Remote Weapon Systems (RWS) amounting to 11.4 million euros or approximately A$20 million. Most of the incremental revenue from this order is expected to come in during 2026. It includes RWS, spare parts, training and other items.
The company didn't go into specifics with respect to the end user. However, it notes that the order is with a Western European NATO country.
It also highlights that the systems are intended to address urgent operational requirements and delivery is expected to occur within the next six months. Management points out that in recent months the drone threat to Western European countries has been increasing.
It believes that this order demonstrates that EOS' flagship Slinger Counter-Drone RWS is a product of choice for kinetic counter-drone weapon systems.
Contract backlog
The ASX defence stock also provided the market with an update on its contract backlog.
As a result of securing new orders, its unconditional contract backlog at the time of writing is over $400 million. This is almost three times greater than at 31 December 2024.
Based on existing customer requirements and current production schedules, the company currently expects most of the contract backlog to be converted into revenue during 2026 and 2027.
But the sales aren't likely to stop there. Management revealed that it has an extensive pipeline of sales opportunities and is busy working to convert them into signed contracts. Though, it warns that there is no guarantee that any pipeline opportunities will be realised in the form of binding sales contracts.
Should you invest?
While it hasn't yet responded to today's update, Bell Potter has been very bullish on this ASX defence stock recently.
In fact, last month it put a buy rating and $11.20 price target on EOS' shares. This suggests that its shares could more than double from current levels over the next 12 months. It said:
EOS is positioned as a market leader in counter-UAS solutions, in particular directed energy, and is fully leveraged to increases in defence budgets globally magnified by higher spending allocations to counter-drone technology. The EU "drone wall" is one such example underscoring the critical need for counter-UAS.
