Electro Optic Systems Holdings Ltd (ASX: EOS) shares have lost some heat after a huge rally over the past year.
At the time of writing, the EOS share price is flat at $8.57.
That follows a tough week for the defence technology stock, with shares down around 13% over the past 5 trading days.
EOS also fell as low as $8.05 during early morning trade today, as weakness across the broader market dragged on investor sentiment.
Even after the recent fall, the stock remains up more than 570% since this time last year.
Let's take a closer look at whether EOS shares are now a bargain buy.
Image source: Getty Images
What does EOS do?
EOS designs and manufactures defence and space technology systems.
Its main focus is remote weapon systems (RWS), counter-drone technology, high-energy laser weapons, and space tracking systems.
The company has attracted strong investor interest over the past year as global defence spending has increased, helped by emerging drone threats.
That interest has also been helped by a growing order book.
In its March quarter update, EOS reported a contract backlog of $518 million at 31 March 2026. That was up from $459 million at the end of December.
Customer receipts were also solid at $72.6 million for the quarter, while operating cash flow came in at $9.5 million.
Why the share price is under pressure
The latest fall does not appear to be tied to any operational changes within the company.
Instead, investors appear to be taking some profit after a huge share price run, while also reassessing the valuation concerns.
There is also still some uncertainty around the conditional South Korean high-energy laser contract.
EOS said in late March that the US$80 million contract remained conditional on several steps. These included an initial US$18 million deposit and a letter of credit.
EOS advised that the contract could become unconditional in the second quarter of 2026. However, it also said there was no certainty this would occur.
But with the second quarter now underway, investors still have not had any fresh update on whether the contract has become unconditional.
And that lack of certainty may be enough to make some investors question whether the deal will be completed.
What brokers are saying
Despite the above, broker sentiment remains relatively positive.
According to CMC, there is a strong buy consensus from 3 recent analyst ratings.
It also shows an average 12-month target of $11.96, implying potential upside of about 40% from $8.57.
The high target is $12.95, while the low target is $10.40.
TradingView also shows analyst price target support, with a 12-month target of $12.96 and a low estimate of $10.40.
Foolish Takeaway
EOS remains a very different stock from what it was a year ago.
The business has a larger backlog, stronger customer receipts, and exposure to defence areas that are attracting plenty of attention.
But the share price has also moved a long way too.
On the technical side, EOS shares are now sitting closer to short-term support. The relative strength index (RSI) is around 40, which suggests it is no longer overbought.
The lower Bollinger band is near $8.13, which is close to today's $8.05 low.
For investors who can handle volatility, I think it may be worth picking up EOS shares at these levels.
