The DroneShield Ltd (ASX: DRO) share price has seen significant declines in the last several months. It has dropped more than 60% since mid-January 2026, as the chart below shows. It'll be very interesting to see what happens in the next year.
DroneShield describes itself as a global leader in AI-powered counter-drone and uncrewed, autonomous systems defence. It develops sensing, electronic warfare and command-and-control solutions that detect, track, identify and defeat drone threats across fixed-site, dismounted and on-the-move operations.
Its services are used by customers worldwide, including the military, government, law enforcement, critical infrastructure, and commercial customers.
Image source: Getty Images
What could happen with a $10,000 investment in DroneShield shares?
After such a large decline, I could understand if some experts thought the DroneShield share price was destined to continue falling in the long term.
But some analysts now seem to think the DroneShield share price could be undervalued given how far it has fallen.
According to CMC Invest, there have been four analyst ratings on the business within the last three months.
Of those ratings, two were buy ratings, and two were sell ratings. However, the two sell ratings were only suggesting a small mid-single-digit decline in percentage terms. The two buy ratings were very bullish about the business.
The average price target of the four analysts was $2.37, which implies a possible rise of 40% over the next 12 months from where it is at the time of writing. That would turn $10,000 into $14,000 in the next year.
I don't know what the S&P/ASX 200 Index (ASX: XJO) return will be over the next year, but I imagine DroneShield would only need to rise 15% to comfortably beat the ASX 200 in the next 12 months.
Of course, no gains are guaranteed, particularly with a volatile stock like DroneShield.
Why are analysts bullish on the business?
Despite the significant revenue growth DroneShield achieved in 2025, the company continues to deliver impressive double-digit growth in 2026.
The business recently gave a trading update that revealed its impressive growth performance.
In the six months to 30 June 2026, it expects to report $125.8 million of revenue, representing year-over-year growth of 74%. It also noted that recurring revenue in the form of software, subscriptions and long-term service revenue was estimated to be $14.2 million, which is 11.3% of the FY26 first half's revenue.
It also noted that FY26 committed revenue at 28 July 2026 was $206 million, of which 13% is recurring revenue. This committed revenue is 95% of FY25 total revenue, so it just needs to win more contracts in the last few months of 2026 to generate more revenue than FY25.
In that update, the company noted it had received a package of contracts totalling $23.2 million from a reseller for delivery to a European military end customer.
The company also estimated its gross profit margin for the first half to be 60%, compared to 65% in the prior corresponding period. However, it is targeting a 65% margin, supported by the impending launch of its next-generation hardware and increasing subscription revenue in the second half.
Overall, analysts now seem to think DroneShield is undervalued, though there could be other ASX shares facing less selling pressure.
