DroneShield Ltd (ASX: DRO) shares are up around 0.5% in Tuesday morning trade, at $2.17 a piece.
The increase is good news for investors, but it's been a volatile ride for the ASX defence stock this year.
DroneShield shares have fluctuated anywhere between $4.74 in January and a low of $2.14 late last week. At the current trading price, the stock is down 35% year to date and 54% from its January 2026 peak.
The shares are also now 41% below trading levels this time last year.
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What happened to DroneShield shares in the first half of 2026?
There has been a turnaround in sentiment around DroneShield shares over the past few months.
After a strong start to the year, supported by higher global defence budgets and geopolitical volatility following conflict in the Middle East, the share price started falling. Investors flocked to defence-related shares when governments around the world hiked their defence budgets and geopolitical risk worsened.
After a peak in late-March, it looks like investors started turning their back on the stock and a sell-off accelerated into May and again in June.
A combination of recent governance and regulatory issues and the cooling of conflict in the Middle East dragged DroneShield shares down.
And surprisingly, reignited conflict in the region hasn't done anything to support investor interest in the defence technology company.
It looks like, now, investors are concerned that the company's future growth may not be large enough to justify its share price.
Is the ASX defence stock a buy, sell, or hold?
I think sentiment around DroneShield shares is finally cooling. I think we could see some more downside over the next few weeks ahead of the company's half-year FY26 financial results announcement in mid August.
It looks like analysts are sharply divided about DroneShield shares, too.
TradingView data shows that out of four analysts, two have a strong buy rating, and two have a sell or strong sell rating.
The average $3.22 target price still implies a potential 48% upside at the time of writing. The maximum $4.80 target price implies that DroneShield shares could leap another 120%.
Meanwhile, some are more bearish, tipping the shares to fall 6% from the current trading price, to $2.05 a piece.
Canaccord Genuity is one analyst with a bullish view on the shares. It renewed its buy rating on Droneshield shares earlier this month, with a 12-month price target of $3.75.
