Austal Ltd (ASX: ASB) has been a booming ASX defence stock over the last 12 months.
Its share price has soared more than 148% in the last year.
However, shares fell 5.85% yesterday despite no price-sensitive news from the company.
This marks a significant drop after a red-hot start to the year.
Is it an opportunity for new investors to buy the dip?
Let's find out.
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Defence stocks still booming
ASX defence stocks have been amongst the best-performing themes in the last 12 months.
Investors have undoubtedly noticed the unbelievable stock price rise for Droneshield Ltd (ASX: DRO).
This defence stock is up more than 600% in the last 12 months.
But it isn't alone.
Other defence stocks that have enjoyed big gains in the last year include:
- Electro Optic Systems Holdings Ltd (ASX: EOS) is up 794.17%
- Elsight Ltd (ASX: ELS) is up 1,163.64%
- Vaneck Global Defence ETF (ASX: DFND) is up 79.80%
- Betashares Global Defence ETF (ASX: ARMR) is up 62.66%
These defence stocks and funds have all risen amidst global political tension and conflict.
This has increased government investment, funding, and development of technology such as drones, AI, or electronic warfare.
Where does Austal fit into this puzzle?
Austal is an Australian-based shipbuilder that specialises in the design, construction, and support of defence and commercial vessels globally.
Austal's products include naval vessels, defence surface warfare combatants, high-speed support vessels, law enforcement patrol boats, offshore vessels, and passenger and vehicle ferries.
It has enjoyed a red-hot 12 months, amidst the same tailwinds pushing other defence stocks higher.
Recently, it has signed key contracts which have bolstered investor confidence and long-term outlook.
Is it still a buy?
Despite yesterday's sell-off, these ASX defence shares are still 18% higher year to date.
The share price closed yesterday at $8.05.
Based on ratings from analysts, it appears it is now priced close to fair value.
Late last year, Macquarie had a price target of $8.10 on Austal shares.
Meanwhile, TradingView has an average analyst target of $7.84.
The current share price would indicate it is hovering close to fair value.
However, for prospective investors, it is worth considering recent geopolitical events and their impact on defence shares.
US tensions involving Greenland (Arctic security, NATO posture) and Venezuela (energy security and regional stability) could influence global defence spending and allied procurement priorities.
These could impact defence companies through higher demand for surveillance, maritime, aerospace, and sustainment capabilities aligned with US and allied programs.
