Shares in ASX defence stock, Austal Ltd (ASX: ASB), have fallen further into the red in Tuesday trading.
At the time of writing, the shares are down another 0.5% and are trading at $3.38 each.
The drop means the shares have now fallen by more than 50% year to date and are also around 45% lower than this time last year.
Image source: Getty Images
What does Austal do?
Austal is an Australian-based global shipbuilding company specialising in the design, construction, and support of defence and commercial vessels.
These include naval vessels, defence surface warfare combatants, and law enforcement patrol boats.
The company also installs and maintains vessel command and control systems, communication and radar technology, and information management systems.
What happened to the ASX defence stock?
Its share price spiked to an all-time high of $8.76 in January as tailwinds pushed ASX defence sector stocks higher overall.
The company also won a few new contracts in late December, including a contract extension worth more than $135 million to build two new Evolved Cape-class Patrol Boats for the Australian Border Force, bringing the total contracted to 14 vessels.
Austal was also awarded a $1.029 billion design and construct contract to build 18 Landing Craft Medium (LCM) vessels for the Australian Army under the Commonwealth's Strategic Shipbuilding Agreement.
In January, US President Donald Trump also said the 2027 US defence budget should be US$1.5 trillion, well above the US$901 million approved so far. Other countries also began bolstering their defence spending.
In February, Austal posted its first-half FY26 results, revealing a 34.4% year-on-year increase in revenue. Its EBIT also climbed 41.3%, and net profit climbed 21.4%. But it also cut its earnings guidance for FY26, citing an accounting issue.
The news spooked investors and triggered a sell-off that Austal shares have struggled to recover from.
Surprisingly, even news of the increase of conflict in the Middle East didn't do enough to convince investors to buy back in.
The shares are now down 61% from that January peak.
Are Austal shares a buy, sell, or hold now?
If broker forecasts are anything to go by, it's time to load up on Austal shares while they're still cheap.
TradingView data shows that there are only three analyst ratings on the ASX defence stock. One is a hold, and the other two are a strong buy.
They all agree on some element of upside ahead, although the range is pretty significant.
The minimum $4.10 target price implies a potential 20% upside.
The average $6.14 target price implies a potential 80% upside, at the time of writing.
And the maximum $7.71 target price implies that the shares could jump 126% higher over the next 12 months.
