Electro Optic Systems Holdings Ltd (ASX: EOS) is one of the ASX defence stocks I think could surprise investors before the end of the year.
The shares are down 2.12% to $9.22 on Friday, leaving them around 27% below their August high of $12.58.
But I'm not too bothered by the recent weakness.
What interests me more is how quickly this stock can move when the company gives investors something new to get excited about.
At today's price, EOS would need to gain around 41% to trade above $13.
Normally, that would sound ambitious over just a few months.
With EOS, I don't think it is.
Image source: Getty Images
We've already seen how quickly EOS can move
Back in August last year, EOS announced its first export order for a 100kW high-energy laser weapon.
The roughly $125 million contract, was placed by a European NATO member state. EOS shares jumped more than 40% on the day.
That's the type of move investors need to remember with this stock.
We saw something similar after last month's half-year result. EOS shares jumped 23% on 25 August and traded as high as $11.98 just 2 days later.
EOS has also added some very large defence orders, including a US$124 million Slinger counter-drone contract announced in June.
If another big one drops before Christmas, I think the shares could move very quickly again and put $13 back in sight.
The business is starting to deliver
The big difference today is that EOS is no longer relying mainly on future potential.
First-half revenue surged 283% to $168.8 million, while underlying EBITDA swung from a $14.9 million loss a year earlier to a $21.6 million profit.
The order book also reached a record $846 million, which gives the company plenty of work already locked in.
Management has since lifted FY26 revenue guidance to between $360 million and $400 million.
Chief executive Andreas Schwer also said this week that he expects the order book to grow again before the end of the year.
If that happens, I think investors will have even more reason to get excited about where EOS shares could go next.
Could EOS shares reach $13?
I think they can.
TipRanks shows 3 current buy ratings, with an average price target of $13.40. Canaccord Genuity is the most bullish at $15, while Ord Minnett and Bell Potter have targets of $12.50 and $12.60, respectively.
That means the brokers are already looking at levels around where I think EOS shares could trade before Christmas.
With a record order book, and management expecting more orders before year-end, I think the setup looks very strong.
