The DroneShield Ltd (ASX: DRO) share price has been bouncing around in January.
But the good news for shareholders is that the overall trajectory has been upwards, with the counter-drone technology company's shares up almost 30% year to date.
The even better news is that Bell Potter believes this run can continue.
Image source: Getty Images
What is the broker saying?
Bell Potter has been looking at the drone industry and likes what it sees.
As well as favourable defence trends from modern warfare, the broker believes the company stands to benefit from counter-drone usage at sports events.
In fact, it is expecting the company to be a big winner from the upcoming World Cup in North America. Commenting on its opportunity, Bell Potter said:
We believe the key catalyst for DRO in CY26 is the potential awards stemming from the US Public Safety market, notably from the US$250m funds allocated to states hosting the FIFA World Cup and the America 250 events for C-UAS protection. We would be disappointed if DRO did not receive material awards from these events.
The broker also notes that it has boosted its earnings estimates for the medium term to reflect a number of items. It adds:
We revise EPS higher by +4%/+8%/+3% across CY25-27e reflecting: lower diluted shares assumptions; higher tax rate; higher opex with DRO accelerating headcount ahead of expectations; and +5%/+5% higher revenue in CY26/27e due to the enactment of the Safer Skies Act.
Where next for the DroneShield share price?
According to the note, Bell Potter has retained its buy rating on the company's shares with an improved price target of $5.00 (from $4.40).
Based on the current DroneShield share price of $4.32, this implies potential upside of approximately 16% for investors over the next 12 months.
Commenting on its buy recommendation, the broker said:
We believe DRO has a market leading RF detect/defeat C-UAS offering and a strengthening competitive advantage owing to its years of battlefield experience and large and focused R&D team. We expect 2026 will be an inflection point for the global C-UAS industry with countries poised to unleash a wave of spending on RF detect and defeat solutions.
Consequently, we believe DRO should see material contracts flowing from its $2.5b potential sales pipeline over the next 3-6 months as defence budgets roll over to FY26e. At 47x CY26e EV / EBITDA, DRO trades at a 34% discount to the global drone peer group. Further, we see upside risk to our revenue forecasts in CY26/27e, given the opportunities observed in the soft-kill C-UAS industry.
