The DroneShield Ltd (ASX: DRO) share price is bouncing back strongly in late afternoon trade on Thursday.
At the time of writing, shares in the counter-drone technology company are up 9.23% to $3.67.
The recovery follows two sharp declines earlier this week. DroneShield shares fell 7.18% on Wednesday and dropped 6.22% on Tuesday, sparking concerns that the recent rally may have run out of steam.
Even after those losses, the defence technology stock remains one of the standout performers on the ASX over the past year.
But with the stock still well below its record high of $6.71 reached in October 2025, investors may be wondering if it can return there.
Let's take a closer look.
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The fundamentals remain strong
DroneShield specialises in counter-drone technology, providing systems that detect and disable hostile drones using radio frequency and electronic warfare solutions.
Demand for these systems has been growing rapidly as militaries and governments respond to the rising threat of low-cost drones in modern conflicts.
The company recently announced 6 new contracts worth $21.7 million to supply counter-drone systems, spare kits, and software to a Western military customer.
This follows strong full-year results for FY 2025.
DroneShield reported revenue of $216.5 million, representing 276% growth year on year. The company also delivered positive EBITDA of $4.5 million, compared with a loss the year before.
Management also highlighted a sales pipeline of approximately $2.3 billion, suggesting strong demand ahead.
Broker Bell Potter remains positive on the company and has retained a buy rating with a price target of $4.80.
Based on the current share price, the potential upside is roughly 30% over the next 12 months.
What does the chart say?
Looking at the technical side, DroneShield shares appear to be attempting a rebound after the recent pullback.
The stock is currently trading around the middle of its Bollinger Bands, which often indicates a neutral momentum phase following a short-term correction.
The relative strength index (RSI) sits around the mid-50s, suggesting the stock is neither overbought nor oversold.
Looking at key levels, the $3.30 to $3.40 region appears to be forming near-term support, which aligns with the lows reached during this week's sell-off.
On the upside, the next resistance level sits around $4, followed by a stronger barrier near $4.80, which coincides with Bell Potter's price target.
If the stock can break through those levels, momentum traders may begin looking back toward the previous record high near $6.71.
Foolish bottom line
DroneShield remains a volatile stock, and sharp swings are likely to continue given the nature of defence contracts and investor sentiment.
However, with defence spending rising globally and counter-drone technology becoming increasingly important, the long-term growth opportunity for DroneShield remains significant.
